India Shedding Tears Over Onion Prices

Sagar Panchal 2012262 India Shedding Tears over Onion Prices 13. Should the govt. continue subsidising onion prices in the event of large supply shortage or incur large investment expenditure to construct scientifically constructed cold storage to provide long run stability to onion prices? Ans.

Subsidising onion price in supply shortage is a short run solution for the problem. Government is already incurring 30% losses, which puts tremendous burden on tax payers. Government should think about long term benefits and invest more into infrastructure of cold and more sophisticated storage plants for onions as well as perishable goods. As in the case pointed out cost for setting up storage is Rs. 6000/- for per mt storage capacity (excluding the cost of land) and country requires tremendous storage capacity. So, long run solution of supply side problems setting up storage capacity is the most appropriate solution.

14. According to you, what are the most critical factors that can justify the decision of expanding infrastructure? Ans.

Factors that can justify decision of expanding infrastructure are: - Country requires additional capacity of around 12 lakh tonnes and modernization of 8 lakh tonnes of existing units. - Conventional storage of onions results in large losses in rabi crop due to weight loss, sprouting and rotting of bulbs. So, to overcome these losses requires cold storages constructed in scientific manner. - Due to lack of storage availability, farmers bring onions directly to the market and unload entire stock and because of glut created prices that farmers get is very low and farmers not able to recover their cultivating cost. - Due to absence of proper storage facilities prices fluctuate widely which creates uncertainty in the environment and hamper their cultivation decision in the coming onion growing season. - Due to lack of storage facilities, government has to increase export of onion to clear the market and because of that sometimes demand-supply disturbance creates in domestic market. - Because of less storage facility, emergencies created by natural calamities cannot be mitigated and gets worsen as no storage of food is there and creates demand-supply imbalance.

15. Who will benefit the most from the scrapping of minimum export prices of onions? Ans.

If government scraps off minimum export price (MEP) of onion, exporters and farmers can be mostly benefitted because with no minimum price pressure exporters can sell onion in international market at very competitive prices and enhance the national exports. As India is already dominant player in export of onion in international market, without MEP, India can more penetrate into export market. Considerable export of onion, farmers also able to extract more from the market and get good returns on their investment.