Arresting volatility in onion market

None other than the commerce minister himself reportedly stated that the price of onion would be double in the local market in the month of Ramadan. He did so after a meeting with the traders of the kitchen market held at the ministry less than a week before Ramadan.
On such a sensitive issue, the Consumers Association of Bangladesh (CAB) said that the general consumers did not expect such a statement from a minister. Critics and consumer rights activists noted that the commerce minister's observation might be used as a licence by the dishonest traders for price spiral of onions in the local market during Ramadan when the demand for the item is almost double.
The price of a kilogram (kg) of onion hit all-time high at Tk 110 in October 2013. Consumers suffered badly due to abnormal price hike of the essential item during most part of the last year. Now, the prices of the imported onions vary between Tk 32 to 35 a kg in the local market. The price of imported onions has already marked a rise by Tk 7.0 a kg in the past week. In the context of Bangladesh, this is a usual practice that the traders would take an advantage of such a statement to increase prices of commodities.
According to the Department of Agriculture Extension (DAE), the annual production of onion can meet one third of the country's annual demand for 1.8 million tonnes. Bangladesh imported more than a half million tonnes to meet the demand. Officials in the ministry of commerce believe that there is no reason for panic concerning onion and its price in Ramadan. Stocks of local and imported onions were good enough to meet the demand during Ramadan, they claimed.
There is no denying that the local onion market might go up following price hike of the item in neighbouring India. In 2013-14, India harvested 19.3 million tonnes of onion, 15 per cent higher than the previous year. Yet, the wholesale prices of onions jumped up by 20-50 per cent across various cities in India in the first fortnight of June as reported by the Times of India.
India set a minimum export price of onions at $300 a tonne last week to discourage overseas shipments amid an inflation scare that threatens to stoke public anger over rising prices at local food markets. After wholesale price inflation accelerated to a five-month high in May, the new Indian government imposed the price rule on onions three months after the previous administration withdrew it. Until early March, the minimum export price was $150 per tonne.
The wholesale prices of different varieties of Indian onions were Tk 12-15 per kg based on the earlier minimum export price of $150 a tonne in the local market. The wholesale price of a kilogram of Indian onion will now be increased to Tk 24 as the Indian government set the minimum export price of a tonne of onion at $ 300.
The Indians consume about 15 million tonnes of onions a year, using them as the base for curries and traditional dishes such as biryani and bhaji. In the past, higher onion prices have contributed to the fall of state governments. The country exports about 1.5 million tonnes of onions a year. Fears of domestic shortages have been fuelled by a scorching summer, a lack of chilled storage and a threat of strike action by distribution workers.
In order to ensure stability in the local market, the Bangladesh government slapped a ban on exports of five vegetables to check prices during the month of Ramadan. The items are, green chilli, brinjal, cucumber, lemon and coriander leaves. To keep a steady supply of onion in the market, the government is trying to import onion from Turkey and Myanmar as well. The decision on banning export was taken aimed at arresting prices in the local market on the ground of short supply.
Farmers have, of late, started leasing out their own land to others and were diverting their lands for other purpose. Despite satisfactory production of various crops, onion cultivation has not received the kind of attention or encouragement it should.  Although its production in Bangladesh has increased in recent years, the gap between demand and supply remains almost the same because of people's food habit and increased population. This drains out a significant amount of foreign exchange every year. The Bangladesh Agriculture Development Corporation (BADC) in collaboration with the state-run DAE needs to take a project to make the country self-sufficient in onion production.
What the corporation needs to do is to import seeds of onion from Europe. Onions there weigh up to 300 grams each although their peel and colour are similar to the local varieties. The government can provide the technical know-how to farmers to grow these onions. If they do so, the country can become self-sufficient in onion production within a couple of years.
szkhan@dhaka.net