Onion, tomato price spike: season not the only reason

The retail prices of onions and tomatoes have firmly stayed above ₹40-50 a kg in many parts of the country over the past few weeks, with tomatoes retailing above ₹60 a kg in many markets.

Onion prices, too, have risen above ₹50 a kg or more in some parts of the country. Price volatility of the two staples is not unusual, but a sharp October-November increase is unusual.

Tomato prices have stayed high for longer than usual. The retail price surge started around July and is in its sixth month, the longest tomato prices have stayed elevated since 2013. The all-India average climbed to about ₹60 a kg in July-August, softened to about ₹40 a kg in September and has once again climbed to about ₹50 a kg, Consumer Affairs ministry data show.

Onion prices began to rise in August with the all-India average climbing above ₹26 a kg and surging to ₹50 a kg in many parts of the country. The rise in onion prices does not appear to be linked to supply disruptions. Arrivals at wholesale markets have stayed steady through the year and there was no dip even in the traditional lean months of June to August.

Rather, larger stocks arrived in the wholesale markets than they had in the corresponding period of 2016. October arrivals were, however, 17 per cent lower than the corresponding period last year, according to National Horticulture Board data. But supply was much higher in September 2017. Therefore, the current surge cannot be attributed to shortfalls in arrivals.

Data show arrivals and prices climbing from August. It could be a case of cartels becoming active again.

The case of tomatoes is different. A link between elevated prices and disruption in supplies is seen but price rise tends to be disproportionately larger than the fall in arrivals of the vegetable at the wholesale markets. Arrival of tomatoes in the wholesale markets between July and October was much lower than it was in the corresponding period last year.

Crop arrivals were 18 per cent lower in July, 39 per cent lower in August, 1 per cent lower in September and about 5 per cent lower in October. So, arrivals were 6 per cent lower in the April-October period year-on-year.

Output had fallen due to shrinking crop area, pest attacks in some parts as well as erratic weather conditions, including changes in monsoon patterns this year.

The recent surge in tomato and onion prices has also been accompanied by widening of the difference between retail and wholesale prices in absolute terms.

In July and August, the difference between all-India average wholesale and retail prices was about ₹10 on an average, Consumer Affairs ministry data show. It declined to ₹8.20 a kg in September and then to ₹7.50 in October. As a ratio of wholesale prices, the difference is benign, about 20-25 per cent.

Similarly, the difference in the retail and wholesale price of onions too has widened with the rise in prices after July. Since August, it has been about ₹6 a kg on an average at the all India level as opposed to ₹4 a kg when prices are moderate. However, as a proportion of wholesale price, the difference is about 25-29 per cent as against 33-39 per cent when prices are lower.