Government idea of buffer stock backfires

The government’s move to create a buffer stock of onions appears to have blown up in its face. Apparently, in a bid to avoid last year’s price rise, the government created a buffer of 20,000 metric tonnes of onions, while there appears to be no buyers. Adding to the woes of the government, political pressure is mounting to procure more onions to bail out the farmers in times of bumper crop.

The government had asked NAFED to procure 7,500 metric tonnes of onions out of which the national cooperative has already procured about 5,200 MTs. Another cooperative, SFAC, was set a target to procure 12,500 MTs out of which it has procured 12,567 MTs as on August 4. The two agencies have procured onions mostly from Maharashtra and Madhya Pradesh.

“The procurement price of NAFED for onions is in the range of Rs 13-15 a kg. We can hold on to the stock for about three months. But there is a bumper onion crop this year and currently it’s selling in the mandis at the rate of Rs 3-4 a kg,” said D.K. Gulati, executive director of NAFED. He added that the prices will remain subdued.

Senior officials in the ministry of food and consumer affairs said that the two agencies have been trying to sell their stocks in the large vegetable markets in Delhi even at a price less than the cost but the result has been discouraging. “The prevailing market price of onions is less than the procurement price of the NAFED and SFAC. Though the buffer stock is intended against possibilities of the runaway price rise of onions as seen in the last two years, the situation this year is completely in contrast,” said a senior official.

The officials claimed that the prospect of onion price going up in coming months is minimal. “There is political pressure to procure more onions to ensure that the farmers do not suffer, but there is every likelihood that the co-operative agencies may not even recover their costs and in the end will need to be bailed out by the government with the tax payers’ money. The CAG may make adverse opinions about the way onion buffer stock was created,” added the official.

The Narendra Modi government had faced flaks last year on account of high onion prices when even imports had failed to tame the price rise. But, the domestic onion production this year has turned out to be bumper with farmers not even getting Rs 1 a kg in some parts of MP and Maharashtra.