Saturday, January 15, 2011

Political Economy of Onion

Food inflation is seeing a good double digit increase since last year and despite a better harvest year, prices of few food items are touching the sky. The Indian government food policy is mostly adhoc and driven more by vested interests rather than any strategic long term policy.
Out of the 5400 cold storages in the country almost 90% are owned by private investors which indicates the government’s lack of investment.
http://www.rediff.com/business/report/india-wastes-59-tonnes-of-fruits-vegetables/20101221.htm
•The Major Onion producing states area Maharashtra, Karnataka, Gujarat, Bihar and Madhya Pradesh.
•Maharashtra is the largest producer of onion in India with a market share of 29%, followed by Karnataka with a market share of 22.35% and Gujarat with a market share of 10.39%.
•Indian onions have two crop cycles, first harvesting starts in November to January and the second harvesting from January to May.
Maharashtra and Karnataka are the main onion-producing states in the country, accounting for almost 50 per cent of total production. The Nashik-based National Horticulture Research and Development Foundation's (NHRDF) Additional Director, Satish Bhonde had made public statements that there could be reduction of output ranging from 1.5 to 10.5 million tonnes since the production has dropped by 35% due to untimely rains.
http://www.fruitnet.com/content.aspx?ttid=14&cid=9232
Inspite of having information in hand, Govt. (both central and state) have not taken any measures to take stock of the situation. The proactive indicators given by the agro system is not taken seriously by the policy makers.
Government still has a supply structure which involves middlemen and mandis.These middlemen add no value and lead to higher retail prices for food besides indulging in hoarding practices. Even today, processing industry cannot buy produce directly from the farmers in most of cases. Even attempts to simplify the process of procuring the goods from the farmers have landed into mess when foreign players like Metro tried to enter the scene. Attempts from the corporate players to control the agricultural produce is also a concern for the consumers. Also, the reforms in agricultural scenario is a state concern and center - state government only does a blame game when things go bad.

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