Anand Sharma urges states to crack down on onion speculators

Union commerce and industry minister Anand Sharma has urged state governments to crack down on what he called "speculative hoarding" by traders, pointing out that all the factors seem to point to foul play by traders trying to make a quick buck.

"[It is] the only explanation if you look at the availability, the price which the farmer is getting, the wholesale prices, and those at the retail level," Sharma said.

Officials in the commerce ministry said wholesale prices of onions are much lower than those prevailing in neighbourhood markets, indicating that traders are hoarding the commodity in the expectation that prices will go up further.

Wholesale prices of onions, meanwhile, were 33% higher last week compared to the same period a year ago, according to the government's wholesale price index, or WPI, released on Thursday. They moved up 30% in the last month alone, according to the data.

The numbers also showed that onion prices followed a similar trend this year with relatively low prices mid-year and a spike towards the end. Wholesale onion prices were the lowest in April when the commodity fetched just 38% of its present price.

Illustrating the commerce ministry's point, while wholesale prices increased only by 30% in the last month, retail prices have shot up by 200% in December, touching nearly Rs60 a kilo.

Sharma warned traders not to hoard the vegetable, pointing out that prices have only one way to go after his ministry banned onion exports on Wednesday.

He said the ministry has transferred the right to decide on onion exports from the National Agricultural Co-operative Marketing
Federation (NAFED) back to its own director general of foreign trade (DGFT) and there was no chance of an immediate lifting of the ban on exports.

Sharma also said no previous commitments or licences could be
used to export the bulb now. "Not a single onion will be allowed to go out of the country," he said, pointing out that the export ban should be enough to compensate for the crop lost to unseasonal rains.

"The crop that has been affected by the unseasonal rains is only to the extent of around 1 million tonnes out of the total 12 million tonnes yearly production... We export around that much as surplus every year," he said.

Sharma added that the country needed investment in agricultural  infrastructure such as cold storage chains to deal with such temporary price fluctuations but denied that the ban on entry of big retailers such as Wal-Mart was preventing such investment.

On his recent trip to India, Wal-Mart global CEO Mike Duke had pointed out that the presence of many levels of traders or middlemen and the fragmented nature of the agricultural market in the country was primarily responsible for hoarding and price spikes.

Studies have pointed out that different agricultural commodities are sold to consumers for three to five times the price at which the farmer sells it to the first trader.

Duke had pointed out that without big investments in retail and sourcing, the Indian consumer will remain at the mercy of speculation and price fluctuations. Duke also said bigger firms would also help India increase the quantity of crops that are processed into longer shelf-life products such as pickles and jams.