Onion Prices Soar Ahead of Diwali; Heavy Rains And Supply Issues Take A Toll

This increase is primarily attributed to heavy rainfall in major onion-producing states like Maharashtra, Karnataka, Telangana, and Andhra Pradesh, which has damaged crops and disrupted supply chains

Retail onion prices in India are currently ranging between Rs 60 and Rs 80 per kilogram and are anticipated to remain high through the Diwali festival. This increase is primarily attributed to heavy rainfall in major onion-producing states, including Maharashtra, Karnataka, Telangana, and Andhra Pradesh, which has damaged crops and disrupted supply chains.

According to a report by The Economic Times, the rise in onion prices, along with increases in the prices of tomatoes and cooking oils, has contributed to a nine-month high in inflation rates for September, with food inflation expected to stay elevated in October.

In the Lasalgaon wholesale market of Nashik, onion prices have remained stable between Rs 45 and Rs 50 per kilogram for over a month. The government had anticipated a drop in prices coinciding with the kharif crop harvest, which is currently underway in several southern states. However, ongoing heavy rains have negatively impacted crop quality, resulting in waterlogged fields and delaying harvests by 10 to 15 days, further straining supply.

Vikash Singh, an onion exporter from Maharashtra, noted that the kharif onion harvest would be delayed in areas experiencing rainfall, potentially keeping prices stable for an additional two to three weeks.

To address rising prices, the Indian government has initiated retail sales of onions from its buffer stock. Furthermore, it has launched a ‘Kanda train’ service to facilitate the transport of onions from Nashik to Delhi, aiming to reduce transportation costs and improve availability in northern India.

The quality of onions ready for harvest has been significantly affected by heavy rainfall across southern states. Tonkini Pramod Kumar, a trader from Hyderabad and owner of Sri Swami Ayyappa Traders, reported that the quality of onions has deteriorated due to severe rainfall in Kurnool and other areas of Telangana and Andhra Pradesh.

The increase in prices for onions, tomatoes, and cooking oils has driven India's retail inflation up from 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 key component of the Consumer Price Index, surged from 5.66 per cent in August to 9.24 per cent in September.

Additionally, edible oil prices have seen their first rise in September after two months of stability, and this trend is expected to continue. The increase is attributed to a hike in import duties by the Indian government and a global spike in palm oil prices, which constitutes a significant portion of India’s cooking oil imports.