Onions : Middlemen Making a Killing, Both Farmers and Consumers Being Ripped

India’s inflation battle and many an electoral battle often runs through the country’s onion markets, which are ridden with malpractices, helping traders push prices up on the slightest pretext, three recent probes suggest…Unscruplulous agents take the onions off the farmer at a cheap price, only to bring them back in a couple of days and sell them to traders at a much higher price. “Price manipulation takes place by the agent’s men quoting an artificially low price and “self-buying”. These agents are making a killing,” said Karmakar, former managing director National Bank for Agriculture and Rural Development (NABARD). With lack of storage facilities and scant knowledge about price trends, the farmers are at the mercy of the agents. To make matters worse, they are being forced to pay them a commission of up to 8 per cent…


both-farmers-and-consumers-Sheer exploitation is the beginning, middle and end of the story of soaring prices of onions. Both farmers ad consumers are being shamelessly ripped. How ? While consumers shell out upwards of Rs. 80 for a kg of onions, the hatrdworking farmer who produced those onions gets just Rs. 8 of a kg and his profit works out to just just Rs. 3.60. Yes, that’s what a National Bank for Agriculture and Rural Development (NABARD) report on onion production and marketing reveals. In other words, a farmer would need to sell nearly 20 kg of onion if he wanted to buy a kg of his own produce in many parts of the capital itself.
According to the NABARD study, in an ideal situation – with no hoarding or unfair practices, and wastage at the “normal” 25 per cent of the 150 million tonne crop – onions should be available at Rs. 14 per kg, with the farmer getting a selling price of Rs. 8 and making just under half of that as profit.
But as the number of callous, greedy agents and wastage along the line increases, the cost to the consumer goes up considerably, with no benefit to the farmer. This year, heavy rains may have resulted in as much as 40 per ecnt of the crop going waste in the key cultivating state of Maharashtra, where the study was carried out. Obviously, middlemen have made plenty of money.
KG Karmakar, former managing director of NABARD speaking to a national daily, the Hindustan Times, said, : “This (wastage) was used as a basis for further manipulating the price by agents and thus the cost to the consumer in Delhi and Mumbai peaked at Rs. 70-80 per kg.” The report talks of unfair trade practices in auctioning and storage, and explains how prices are manipulated. When the farmer goes to sell his produce to the local agricultural produce marketing committee (APMC) market, unscrupulous agents – whose role should actually be to help farmers find a buyer – collude to give him the impression that there is no demand.
Then one of the agents takes the onions off the farmer at a cheap price, only to bring them back in a couple of days and sell them to traders at a much higher price. “Price manipulation takes place by the agent’s men quoting an artificially low price and “self-buying”. These agents are making a killing,” said Karmakar. With lack of storage facilities and scant knowledge about price trends, the farmers are at the mercy of the agents.
To make matters worse, they are being forced to pay them a commission of up to 8 per cent, the report says, in contravention of the APMC Act that says agents should charge commissions from buyers and not sellers. The daily goes on to point that India’s inflation battle often runs through the country’s onion markets, which are ridden with malpractices, helping traders push prices up on the slightest pretext, three recent probes suggest. According to the Commerce Ministry, the wholesale price of onions rose by 114 per ecnt since June 2012. There are many reasons behind the wild swings in prices. During the June-September monsoon months, vegetable prices usually remain high due to rain-related supply disruptions.
However, rampant malpractices help traders take advantage of such situations. Recent studies show evidence of monopolistic practices in Lasalgaon, Asia’s largest onion market near Nashik in Maharashtra. In December 2010, when prices peaked during the last major spike, a probe by India’s statutory anti-monopoly agency, the Competition Commission of India (CCI), revealed that one firm accounted for nearly one-fifth of the total trading that month.
A 2012 report by the National Council of Applied Economic Research identified ‘collusion’ as a major hurdle in fair trade, with a handful of traders monopolising almost all big markets. India’s onion trade is commission-based. Licences for all intermediaries  from commission agent, wholesaler, transporter, storage chain owner, and even the railway agent  are often held by the same business families.
After its probe, the CCI issued a split verdict, citing insufficient evidence to penalise traders, but ordered a study by the Institute for Social and Economic Change (ISEC) in Bangalore, which then found evidence of major malpractices. The ISEC probe surveyed 11 markets. “The average experience of commission agents and wholesalers in onion trade in selected markets is found to be around 20 years… This creates oligopoly-like situation in the market,” the probe said.

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