Onion prices increase ahead of Diwali due to heavy rains and supply problems

The price of onion in retail markets is currently between Rs 60-80 per kg and is expected to remain high till Diwali. The surge in onion prices is mainly due to heavy rains in major onion producing states like Maharashtra, Karnataka, Telangana and Andhra Pradesh, which have damaged crops and disrupted supplies.
As a result, prices of onions, tomatoes and edible oils contributed to September inflation reaching a nine-month high, and food inflation is expected to remain elevated in October, according to a report by The Economic Times.
Onion prices at Lasalgaon wholesale market in Nashik have been fluctuating between Rs 45-50 per kg for over a month now. The government had expected prices to drop with the harvesting of the kharif crop, which is underway in several southern states. However, the ongoing heavy rains have adversely affected crop quality in various areas, leaving fields waterlogged and delaying harvesting by 10 to 15 days, further putting pressure on supplies.
The report quoted Maharashtra onion exporter Vikas Singh as saying that in areas where there will be rain, the kharif onion harvest will be delayed, which could keep prices stable for at least two to three weeks.
Government intervention
To reduce the rising prices, the central government has started retail sale of onions from its buffer stock. Apart from this, it has started ‘Kanda Train’ service to transport onions from Nashik to Delhi, which aims to reduce transportation cost and increase availability in North India.
Heavy rains have significantly affected the quality of onions ready for harvesting in the southern states. The report quoted Hyderabad-based trader and owner of Sri Swamy Ayyappa Traders Tonkini Pramod Kumar as saying that the quality of onions has deteriorated due to heavy rains in Kurnool and other areas of Telangana and Andhra Pradesh.
A surge in prices of onions, tomatoes and edible oils has pushed India’s retail inflation – which was at a five-year low of 3.65 per cent in August – to a nine-month high of 5.49 per cent in September. Food inflation, which is a major component of the Consumer Price Index, rose to 9.24 per cent in September from 5.66 per cent in August.
increase in cooking oil prices
Edible oil prices witnessed their first rise in September after two months of decline and are expected to remain stable in the near future. The increase is attributed to the hike in import duty by the Indian government, which coincided with the surge in global palm oil prices. India depends on imports for nearly 60 percent of its cooking oil needs, with palm oil accounting for the largest share.
The report said the Malaysian Palm Oil Board has indicated that palm oil prices are likely to remain above RM 4,000 per tonne in October, with the high prices attributed to ongoing uncertainties in Malaysia and a significant drop in palm oil stocks year-on-year.