onion price hike: what's so great about it?

Onion prices have zoomed to Rs 80 a kilo in many retail markets in some cities. So what? Milk prices have again been raised, the second time within a year. Sugar and dal prices have come down from their peaks but the prices raised by halwais, tea-stalls, restaurants etc have not been reduced. India consumes  120 million tonnes of milk, 30 million tonnes of sugar and jaggery, and 15 million tonnes of pulses a year but only 10 million tonne onions.

So, why does the onion price rise make such big news?

You will say, "Onion price hikes in the past have led to government falls." Forget that, no government is going to fall due to this onion price hike. It won't impact even the coming state polls.

"OK," you might say, "Onion is put in all Indian vegetables and curries. It is a must in most non-veg preparations..." I beg to differ here too. That is not the reason onion is big news.

In my humble opinion, the answer lies with TV channels. Onion is bought whenever people go to the market to buy veggies and it alarms them if they find prices suddenly up. In the eyes of TV channels, this makes superb news-material. A channel last evening paraded a housewife who dutifully said, she won't be able to fire her heath. Another channel predicted that onion would rise to Rs 150 a kilo in a couple of days. In yet another channel, an illiterate anchor joined a similarly qualified reporter standing in a veg market to show with authority how the government failed to guess and then take corrective actions.

A colleague of mine in the electronic media was candid in admitting that onion was a big issue because there was not much juice left in Radia-Raja-Tata affairs to sustain viewer interest. "Think," he said, "if there were a bomb blast somewhere or a major air accident today, would we be chasing onions?" I got my answer.

PS
On a more serious note, the government failed miserably [like almost always] in taking timely action. Farmers' associations of Maharashtra and trade circles have been predicting this type of situation [though perhaps nobody knew that would be so sudden] for three weeks now. On top of it, where was the need for Pawar to make a statement yesterday that prices would come down, if they really do so, not before three weeks or so?

raising support prices of crops

For those who don’t know what food procurement and support prices mean in Indian context, this is a small primer.

India grows about 225 million tonnes of food grains and government agencies procure about 50 million tonnes of it from farmers in the harvesting season. Most of the grain so procured [mostly wheat and rice] is channelized into the state-run Public Distribution System or the rationing network.

Every year, the Union Government announces ‘support prices’ for main crops for the next season. Support price is the price at which the government commits to buy that commodity from the farmer if the market price goes below that, so that the farmer is assured of a minimum return. So, for the coming season [November-March], wheat, mustard, safflower, lentil and gram support prices have been announced. In practice, the support price does not remain a price to be paid during distress, as the procurement agencies are asked to proactively garner as much grain as they can.

Food Corporation of India is the coordinating agency for food grain procurement, storage, movement and disposal of stored grain. FCI, procurement agencies of different states and some cooperative giants carry out the actual procurement at major food grain markets and by putting up procurement centres in important production centres.

Over the years, the support prices of all crops have been raised substantially. A Commission on Agricultural Costs and Prices [CACP] comes out with the support prices based on a complex calculation to account for the cost of cultivation, profit margin, inflation etc, and the government tops it with some more for political reasons.

Government uses the support price also for giving cropping guidance – this year, the support price of wheat has been raised modestly from Rs. 1100 per quintal to Rs. 1120, while that for gram has been raised from Rs. 1760/q to Rs. 2100/q and that for mustard from Rs. 1830/q to Rs. 1850/q. Since India imports large quantities of gram and other pulses [and these are very important for nutrition security as India is predominantly a vegetarian nation], the government’s encouragement to farmers to grow pulses is understandable.

On the other hand, constantly raising food grain support prices leads to rise in food grain prices for bulk consumers such as mills and retail consumers. India’s food inflation presently stands at over 15.5% per year, and it is at least partly due to rise in support prices.

Economists, agriculturists and consumer groups, all criticise the system of support prices on one count or the other – mostly counter to each other’s points of view. But the system continues. It breeds lots of corruption, wastage and inefficiency in food trade. It also does not allow fair price discovery for farmers. The country ends up paying huge subsidies for procurement and storage. The country also loses a good deal of foreign exchange as it cannot sell surplus food grain when the global prices are high, due to political sentiment attached with food security.

In fact, India’s procurement will rise further if the government comes out with the Food Security Act [guaranteeing food grains to all, as a matter of right] – this is the promise the Congress made during the last general elections.

so much adulteration, what to eat?

Of late, we hear reports of all types on food adulteration of new types. In olden days, the doodhwalla [milkman] used to put a lot of tap water to make some quick bucks. Local lala [shopkeeper] would mix small pebbles in food grains and/ or sell old and poor quality goods as good quality and fresh stuff. Admixtures such as papaya seeds in black pepper were common, but they were safe. Then came the age of mixing khesri dal in pigeon pea, non-food grade colours in sweets, sawdust, chalk powder and even dried horse shit in spices. Ripening of fruits such as banana with ethylene was done in the open, partly due to ignorance about its harmful effects.

Now we are in an age where technology rules, so you could not expect food adulteration to lag behind. A great deal of adulteration now being done is still old jugaad type [cobbled together] but with total disregard for human health or sentiments and in a very organised way. It is so widespread that sometimes you don’t have a choice but to accept it a way of life as in the case of vegetables and dairy products.

Some recent reports of such widespread food adulteration / manipulation are eye opener.
It is reported that in many areas of Maharashtra, Gujarat, Andhra Pradesh and Uttar Pradesh, artificial milk, cheese and ghee are sold more than the natural ones. For making artificial milk, they mix fat, urea caustic soda, detergents and formalyn - most of them very much harmful to humans. For making ghee, they boil bones of dead animals and mix chemicals and scent to give it texture and aroma of pure ghee. Rackets of adulterated milk products thrive because of high consumption, extremely lax and corrupt checking system and very high margin. Thousands of fake packats, pouches and tins of reputed companies have recently been seized from Uttar Pradesh.

Use of oxytocin, a plant hormone, for quick growth of gourds is reported to be very common. When the gourd is small, it is injected with oxytocin. Instead of the usual three weeks, the gourd then takes only a week to turn as big as a normal gourd.

If you add the blatant disregard for food standards even by reputed companies, and minor [but very harmful] use of chemicals for washing vegetables, shining pulses and coloring foodstuff, you find hardly anything worth eating without ingesting a large amount of harmful chemicals. Only today, papers have reported a CSE study that found that all reputed brands of honey have unacceptable levels of antibiotics in domestic packs while the honey exported by the same companies have lower levels of anitibiotics. In an earlier analysis, the water quality of major bottled water and cola brands was found to be poor.

Take care, the learned and resourceful people! [Let others go to hell.]

food rot, supreme court and a government sitting cosy

Media had developed fatigue over the issue of rotting foodgrains and people at large had turned cynical. But when the Supreme Court barked yesterday, the issue has again become alive.

Things and the way the government functions have not changed over years; they did not change since I wrote this post a month ago. They are not supposed to change from today.


It is not the role of the Supreme Court to run the country, it is for the government to do so. But when the government does not do the right things and in the right way, the cout intervenes. When the government does not even provide correct figures of foodgrain damage, the court appoints its own team. When the court issues an order [can see the wordings here], the minister says, they are not bound by the order since it is in the form of a suggestion. Now the court snubs the minister and opposition raises a hue and cry in parliament, but what happens?

I'll tell you. There will seem to be some action: some statement from the government side on what it has been and will be doing. Some action against lower-level FCI officials. A letter to States, an all-India level meeting, a monitoring committee, new guidelines on storage, Sonia's NAC will meet and discuss Food Security Bill and advise the government, the Group of Ministers will take a marginal decision... The Centre and states will blame each other. There will be hardly any silos when the next crop comes in about a month and even if storage capacity is increased [as claimed], food will continue to be stored unscientifically. On a larger horizon, agriculturists and companies depending on farm produce will keep making their decisions based on guesswork in absence of a policy guidance. Enormous sums will keep getting wasted on unnecessary subsidy, grain damage, transportation and so on. Country would not benefit from export of grains at high international prices. Private investment will hesitate to come into the farm sector...

What I am saying is not a gross generalisation and frustration with the system. I will soon give you the statistics and bare facts to enable you to see for yourself the rot in the system.

guest chat: food security

This chat item has been contributed by friend Soumitra Bose* I am obliged, more so because this blog is hardly visible right now.

I once asked a journalist friend whether the much touted Food Security Bill would be brought in parliament in the budget session. At that time, budget session was two months away. “In no way,” he replied. “There are much more important things to take care.”

“But it is Sonia’s pet project and the government has been saying…”

The friend laughed. I could not understand how an issue as important as food security, for which the government had shown quite some interest and which was Congress’s poll promise, could be relegated to the backseat. Economic journalists had been writing, some quoting sources, that a bill was imminent.

“They need to settle this foodgrain production thing,” I tried to give a reason to support him. At that time, rotting of foodgrains was not in the news. The only problem was decline in foodgrain production due to last year’s drought.

“Do you think, that is a problem?” He asked.

I squinted my eyes and let lines grow on my forehead, but no other reason came to mind. I am an economist by profession, not a political analyst. Economists seldom read things other than economics.

“I will tell you later. Let the session begin.”

We met only a few days back. In the mean time, many things have happened . Mamta’s rally and talks, Kashmir problem, GST talks, Commonwealth corruption issue, etc. have taken valuable time of the earlier and this parliament session. Rotting of foodgrains was discussed everywhere, but there was hardly any talk of the food security bill. Now the Supreme Court has said that rotting of foodgrains is a crime and instead of letting the grain rot, government should give it free to the poor. Sharad Pawar, the ICC chairman more than agriculture minister, has said that it is not possible to give grain free to the poor. But, for once, he is right. It can be given with some sort of subsidy but not free. The Supreme Court too had not said this thing as a direction but to show their dismay at the food management by the government. We feel that if poor people are given more subsidised food, they get to store more food. This gives them food security and the entire problem of storage vanishes. That will also rein the prices in a much better way than trying open market sale and so many other mechanisms none of which seem to be working.

In fact, what Shard bhai says and what economists are saying is what the food security bill is meant to achieve, but where has the bill and NAC people gone?

I asked that friend now.

“It will come to discussion table now. The food ministry has already prepared its draft. GOM has done its job. NAC will start discussion on it now and things will roll.”

“You proved right. It was delayed, but why?”

“Look at the election calendar, dear,” the friend said.

I know he will prove right this time also. We will soon have our food security bill. The discussions will start just after the parliament session ends in a few days, I bet.

*Freelance contributor to many newspapers

chat unchat

"... increase the storage facility by constructing godowns in every district. But not a single grain of food should be wasted. If due to lack of storage facility food grains are rotting and getting wasted, then distribute it free to those hungry..." Supreme Court bench in an order on 12th August 2010

food production going to stagnate?

Green revolution of the sixties and seventies was made possible with new varieties of main crops [wheat and rice], expansion of irrigation and progressive farmers using inorganic fertilizers in copious quantities. But this happened in western UP, Punjab and Haryana and a few other pockets. The otherwise potential areas of West Bengal, Bihar, eastern Uttar Pradesh, Bihar, Jharkhand and Chhattisgarh remained untouched by it.

Of late, the government and experts seem to have realised that it is no gain trying to increase agricultural production from the areas that have already given the last hike since there is not much scope of yield increase there. For the rest of the country, they brought in a mega scheme called national food security mission. But then there seemed more scope of yield jump in the eastern part, with fertile lowlands and good amount of water available.

But what they did not account for is the mighty rain god. As if to remind them of their folly, the rain god skipped only that part of the country during July and the first half of August – the main months for planting kharif crops. The time for late planting is also fast running out of hand.

This shows how even the best of our efforts might not succeed if monsoons do not favor us with rains evenly spread over time and space. That good scenario takes shape only rarely.

Now we are in a situation where we cannot expand irrigation because of our inefficiencies and low remaining potential for major irrigation schemes.

Soils in Punjab and Haryana are showing signs of poor health due to too intensive cropping and overuse of chemicals. There are also issues relating to over-drawing of ground water.

There is some scope for improving yields of pulses and oil crops if we grow them in irrigated lands, but there is competition among food crops and cash crops for good lands. Land is also becoming degraded and some is being diverted to non-farming purposes.

ICAR, its institutes, agriculture universities and other research bodies have not come out with any revolutionary technology. The new varieties that they develop routinely do not show promise of increasing yields.

Over half of the cultivable land is rainfed, so nothing is guaranteed.

Climate change is staring at us, with likely changes in climate patterns, long spells of droughts, extreme temperature variations, frequent occurrences of storms, cloudbursts and hail, and new physiological and pathological diseases and pests.

India may well achieve 4% growth that the planning commission has targeted, but only with the help of non-foodgrain areas such as cash crops, horticulture, dairy, fisheries, animal husbandry and food processing. But the production of foodgrains and oilseeds is not likely to grow beyond 2% or so. The demand is supposed to overtake the current level of production in a few years. Is there a solution in hand?

hiding behind growth figures to explain inflation, mr. finance minister?

Finance Minister of India, Mr. Pranab Mukherjee, yesterday said in parliament: "There is no question that the strong recovery, desirable as it is, has contributed to an acceleration of prices.” He explained it and it was convincing.

But Mr. Mukherjee, what you said is part of the story and it is so when we are talking about inflation as it is measured by statisticians and analysed by economists. Price rise is something that affects humans who use money to buy things. You and your colleagues and your spin masters have been blaming the present price rise on last year’s poor monsoon rains, rising consumption, international commodity prices and so on.

What you need to do [not explain], Mr. Minister, is to bring down the prices in the retail markets, especially of essential commodities. Check the price rise in wheat, rice, pulses and edible oils that are staple food for Indians. You can do so if you really try hard because you have huge huge stocks of food grains and a nearly unlimited purchasing power. Check rise in prices of milk and milk products. These are the best nutrition supplements for the common man, especially children. You need not artificially control the prices of petroleum fuels, but you can surely check corruption and inefficiency in petrol and diesel, kerosene and cooking gas management by public sector companies.

To say that Public Distribution System [PDS] is operated by the States is to shirk your responsibility of suitably incentivising, guiding and advising the States. If you can ensure an efficient and leak proof PDS in the country, the impact of ‘inflation due to rising growth’ will not hurt people too much.

Similarly, blaming the States for huge margins being charged by retailers and middlemen does not wash, dear Minister. In Delhi, you get vegetables and fruits in residential colonies at rates that are up to five times of the prices prevailing in the city’s wholesale markets.

So, dear Minister, be committed towards people’s welfare like Gandhi ji was. Don’t hide behind economic explanations for people’s misery.

rotting foodgrains and a hungry nation

Rotting of foodgrains should make no big news. But when the foodgrains rot after the government has bought them for distribution among the poor, and when foodgrains rot in mounds, and when foodgrains rot because of rot in the system and callousness, it becomes an unpardonable crime. But whom are you going to punish?

The Prime Minister? He is the head of the government that is responsible for such a rot, but he is above reproach. How is he supposed to be responsible for rotting of a million tonnes of foodgrains while about a third of the country's population sleeps hungry? No, you are throwing stones at a wrong glasshouse.

The Agriculture Minister? Ha ha!! You are joking. The Minister is the highest political leader responsible for food management for the entire country. So what? He has given directions, he is monitoring the things, he has suspended a few lower level officials, he will take further action. In the meanwhile, he is hopeful that with the investment and schemes he has approved, there will be enough storage within a couple of years and the corruption in the Food Corporation of India will be gone.

The bureaucratic heads? Na, na. They are the best, having been selected into the Indian Administrative Service. If there is something good happening, it is because of them. You think, what would have happened to agricultural production and stored foodgrains if they were not there? Thank them for their devotion to duty, sincerity, honesty and intelligence.

Then who is left there to take the blame? No one, sir [or madam]. Even if the opposition parties prove that A, B, C of the ruling circus are to blame, who will punish them?

It is not that the government was caught napping. Everybody in the concerned government department must have known even a year before that there would be problem of storage if corrective actions are not taken in time. But they chose to ignore, for shameful reasons.

Even the Supreme Court pulled up the government and called such waste of foodgrains a crime, but how does it affect the ones responsible? In the meantime, the blame game has started between State and Central government about who has the responsibility to store the grain safely.

The grain will continue rotting and on the other side of the storage bins, there will be debates in parliament, reports on TV and print media, editorials, discussions on channels, a few protest marches in some cities, even a general strike. Prices will keep rising, grain will be out of reach of the poorest lot, pockets of politicians, bureaucrats and contractors / traders will continue to fatten.