Study on Market Structure and Efficiency in Karnataka: A Case of Onion

Incidence of distress among farmers is very high either because of low price realisation and/or lower productivity. A competitive and efficient marketing system is of utmost importance to bring farmers out of distress. Onion being the major crop covering 67 per cent of the area under vegetables in Karnataka, the marketing system has direct bearing on the large number of farmer households. Lorenz curve and Gini coefficient were used to study the competitiveness and Toda-Yamamoto (T-Y) method to Granger Causality was used to examine the price integration and efficiency. Bengaluru which accounted for more than 65 per cent of the onion arrivals was a highly concentrated market. Only 3 per cent of traders handled 50 per cent of onion during 2017-18. The Gini coefficient ratio of 0.82 suggest extremely level of concentration in the market. In this situation the farmer seller will be a price taker and has no say whatsoever. Analysis on integration and efficiency revealed that there was two-way Granger causality in most of the markets. All the markets were interdependent with the Bengaluru market which reveals that there exists free flow of information and markets are efficient to that extent. However, due to concentration the process of price discovery is inefficient reducing the farmer to a mute spectator and price taker. Market intervention through information, innovations and institutions are of paramount importance to bring farmer out of distress.