Understanding the Recurring Onion Price Shocks: Revelations from Production-Trade-Price Linkages

The prices of some agricultural commodities like onion, potato and tomato are highly volatile, which largely originates from the production uncertainties and changes in nature of demand. These commodities are integral part of Indian diets and have become almost indispensable assuming the nature of necessity. These demand characteristics have made the prices vulnerable to violent fluctuations due to shocks in the production. The major concern of policy makers and stakeholders lies in the fact that how to manage or deal with such price shocks which are hitting the country almost every alternate year. Such a situation is not only creating domestic disturbances in the food economy, but also causing hardships to the farmers. Onion crop has received greater attention because of extreme price volatility. In case of extreme price rise, the farmers shift the area under cultivation of onion from other competing crops. Such decisions lead to glut in the next season and farmers sometimes are not able to recover even the cost of production. Thus, the marketing and price scenario needs to be effectively examined and monitored to understand the linkages among markets and nature of volatility in onion prices. This study is an attempt in this direction. ICAR-NIAP has timely come out with this publication which has important policy implications. I am sure that findings of this research will be useful to policymakers and stakeholders for controlling the marketing and price inefficiencies, particularly in sensitive commodities like onion.