Onions, a staple in most Indian households, are likely to make consumers cry again, with erratic monsoon leading to an eventual delay in harvest. Delay in arrival of the Kharif crop and shorter shelf life of the buffer stock because of Cyclone Tauktae are likely to fuel a rise in prices, says a research note.
In a report, ratings agency CRISIL says, “The trend of the past two years shows untimely rains in August-September hampered onion harvest, and prices doubled compared with 2018 when conditions were normal. CRISIL Research forecasts an increase of more than 100% in onion prices this year. Prices are expected to cross Rs30 per kg for Kharif 2021 because of the challenges faced in transplanting the crop in Maharashtra, though this will be slightly lower on year to 1% to 5%, on a high base of Kharif 2020.”
Additionally, it says that natural calamities (Cyclone Tauktae) have increased moisture content in the stored rabi crop, thereby shortening its shelf life. This is expected to prepone the arrival of stored rabi crops before the lean season, adding to supply woes.
On average, India consumes an estimated 13 lakh tonnes of onion every month. The crop is grown in three seasons: Kharif, late kharif and rabi to meet this demand. This makes onions available for most of the year.
Maharashtra, Karnataka and Andhra Pradesh are major Kharif onion-producing states, contributing over 75% of total Kharif onion production.
The bulb’s supply and price dynamics are dominated mainly by climatic conditions, especially the southwest monsoon. While rabi onion contributes to 70% of the total onion production, the Kharif onion plays a vital role in maintaining supply during the lean period of September-November, a primary festive season for India.
According to CRISIL, during the corresponding festive season last year, onion prices had doubled compared with the normal year of 2018 – mainly due to supply disruption caused by the heavy and erratic monsoon that damaged the Kharif crop in Andhra Pradesh, Karnataka and Maharashtra.
This year, the southwest monsoon kicked in on 3rd June, signalling a good start to the Kharif season, and farmers have preferred crops such as onion and chilli over highly perishable ones such as tomato. July witnessed a prolonged monsoon break with rainfall at a 2% deficit of the long period average (LPA) pan-India. To add to it, August, the critical month for transplantation, did not see any recovery in rainfall. The deficit stood at a cumulative 9% as of 30 August 2021.
CRISIL says, “Fluctuating monsoon is expected to pose challenges in transplanting the crop in Maharashtra, which accounts for 35% of the total Kharif onion produced in the country. With Nashik, which contributes 37% of the Kharif onion produced in Maharashtra, facing a rainfall deficit of 33% as of 30th August, followed by Pune, which contributes 13% of the Kharif onion produced in Maharashtra and was facing a rainfall deficit of 65% as of end-August, many farmers, who had set up nurseries in anticipation of good returns have been unable to transplant owing to the erratic monsoon. This is likely to delay the process and may result in late arrival of the onion crop, thus widening the supply-demand gap during the lean months of September to November.”
Karnataka contributes 30% of the total Kharif onion produced in India. North Karnataka accounts for the bulk of the total Kharif onion production in the state, contributing about 70%.
Onion transplantation in a few of the onion-growing districts of the state has been delayed due to poor monsoon. In contrast, in Chitradurga, as per CRISIL’s on-ground information, farmers have opted for the direct-seeded crop after the district received surplus rainfall at +43% of normal as on 30th August 30. With the monsoon spell reactivating in major districts such as Bagalkot, Gadag and Davengere, Karnataka is expected to become the saviour.
In Andhra Pradesh, as per CRISIL’s on-ground reports, almost 70% sowing of onion has been completed due to 17% higher rains from 1st June to 25 August 2021. However, August saw deficit rainfall, with Kurnool, which accounts for 86% of the total onion produced in the state, having a deficit of around 45%. This, the agency says, is expected to impact the timely transplantation of the crop.
“Thus, the vagaries of monsoon are expected to delay arrivals of Kharif onion in the market by two-three weeks to the end of October or beginning of November. Prices are likely to be elevated until then,” CRISIL added.
The government has taken measures to curb the rise in onion prices. A buffer stock of 2 lakh metric tonnes (MT) has been set for onion for fiscal 2022. Almost 90% of the planned buffer stock for onion has been procured, with the highest contribution from Maharashtra (about 0.15 million MT). Additionally, the government has also advised an increase in Kharif onion acreage in the traditionally non-onion-growing states of Rajasthan, Haryana, Madhya Pradesh, Gujarat and Uttar Pradesh from 41,081 ha to 51,000 ha.