The great onion robbery: 135% mark-up from mandi to retail

NEW DELHI: Speculative traders are making super-profits by fixing prices in the onion trade while the government is playing around with ad hoc fixes. On Tuesday alone, wholesale traders in Delhi bought onions at about Rs 34 per kg while it was sold in retail at Rs 80 per kg. That’s a margin of Rs 46 per kg or 135%!
About 11,445 quintals of onion were bought in the Delhi wholesale markets on that day.So, the total difference between what wholesale traders paid and what Delhi households paid would be over Rs 4 crore.
Of course, between the wholesaler buying the onion and the retailer getting it to the local market, there are transport costs, wastage and so on. But this can at best be a fraction of the 135% margin, particularly for a commodity like onion that is not easily perishable.
Wholesale price data are collected daily by the National Horticultural Research & Development Foundation (NHRDF) set up by Nafed, the farmers’ cooperative federation run by the government.
This story is not confined to Delhi. In 44 major onion markets across the country, profit margins for just one day were of similar orders ranging between Rs 1,500 per quintal in Pune and Rs 5,500 in Udaipur. Multiply these with daily arrivals (and sale) in each and you get the gigantic amounts fleeced from consumers every day — over Rs 10.5 crore in Bangalore , Rs 81.4 lakh in Mumbai, Rs 1.3 crore in Kolkata and so on.
Agriculture minister Sharad Pawar has said it may take two-three weeks for prices to come down. At the rate at which hard earned money is being transferred from people to traders, that is enough time for hundreds of crores of rupees to be thus redistributed.
So, who is cornering the mega-profits? There is a fog of contradictory claims and half-truths that surround this key issue. Kewal Kapoor, an onion commission agent in Delhi’s Azadpur mandi, said that onions were sold to wholesale traders at not more than Rs 50 per kg in the whole of December.
The commission agents charge a 6% commission for putting the seller together with the buyer. That will make the price Rs 53 per kg. All subsequent hikes are mark-ups by chains of traders, apart from the minor incidental costs mentioned earlier.
But another agent in the same mandi, Mohit Kumar said that wholesale prices itself were Rs 70-80 per kg. ‘‘Retailers can’t act together. They are just individuals. They take a small profit,’’ he said. According to him, rains have curtailed supply and hence prices have gone up. He had no explanation for the fact that the official rate at the wholesale market was Rs 34.90 per kg and not Rs 70-80 as he claimed.
Bhure Lal, a vegetable vendor in East Delhi, said that he bought onions at Rs 72 per kg from the wholesaler in Shahadra mandi. ‘‘In Azadpur, it must have sold at Rs 60,’’ he said. Kapil Chawla, another trader, blamed the huge surge in exports for the depletion of stocks causing a supply constraint and hence high prices. ‘‘It’s all a matter of supply-demand!’’ he said.
The whole supply constraint argument is itself under a cloud. In December, Delhi received 2.57 lakh quintals of onion compared to about 3.8 lakh quintals in 2009 and just 1.5 lakh quintals in 2008. But the modal price (the most frequently settled price) in December was Rs 34 this year, Rs 14 in 2009 and Rs 11 in 2008.
So, over a two-year period, onion supply has increased almost 66% since 2008, but wholesale prices have jumped over 300% in the period. Clearly, there is more to it than simple demand-supply equations.
Exports are definitely restricting domestic supply. India’s exports have increased from about 7.8 lakh metric tonnes in 2005-06 to over 18.7 lakh MT in 2009-10. Onion production has also increased, but at a slower rate, from 86 lakh MT in 2005-06 to over 121 lakh MT in 2009-10.