The slow pace of buying has raised concern in the consumer affairs ministry, which fears a thin buffer could leave the market vulnerable to hoarding if weather-related risks to the upcoming kharif crop trigger a surge in prices, said people familiar with the matter.
Officials are expected to hold discussions soon on speeding up procurement from the rabi harvest, which began on May 15, to bolster supplies ahead of the festive season, when onion prices usually rise.
The Centre maintains a buffer stock of onions to help control prices during the lean supply season. The size of the buffer stock, procurement prices and procurement period vary depending on market conditions. This year, onion farmers in Maharashtra had been protesting since the rabi harvest began in March as prices remained unremunerative.
The government increased the procurement price to ₹21.25 per kg on Saturday, marking the fifth increase since procurement operations began on May 15. It also extended the procurement deadline to July 31 from June 30.
“The government did not start procurement when small farmers, who did not have holding capacity or the necessary storage, were forced to sell onions at subdued prices. Now, when the government wants to buy onions, the farmers do not want to sell them as they are getting higher prices in the mandis. The procurement prices offered by the government have been lower than the prevailing market prices,” said Bharat Dighole, president, Onion Farmers Association of Maharashtra.
Buffer stock procurement, which supports open market prices, was delayed this year after the government brought in the Central Warehousing Corporation, in addition to the National Agricultural Cooperative Marketing Federation and the National Consumer Cooperative Federation.”Some market participants have started hoarding as they believe that lower onion stocks with the government will reduce its capacity to intervene in the market if prices spiral,” said a trader, who did not wish to be identified.
The government has acknowledged that some market participants have begun hoarding onions.