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Revolutionary Move: Government Slashes Onion Prices to Just Rs 25/kg – Shoppers Rejoice

The National Cooperative Consumers’ Federation of India (NCCF), the highest governing body for consumer cooperatives, is preparing to initiate the sale of onions at a subsidized rate of Rs 25 per kg. This initiative will involve both retail outlets and mobile vans and is scheduled to commence on August 21 (Monday). This move is being viewed as another instance of direct market intervention by the central government.

This decision closely follows the government’s imposition of a substantial 40 percent export duty on onions, aimed at discouraging exports, boosting the availability of onions within the domestic market, and stabilizing prices before the upcoming festive season. The government has announced that this export duty will take immediate effect and remain in place until December 31, 2023.

Currently, the onion buffer stock stands at 3 lakh metric tonnes (LMT), but the government aims to raise this to 5 LMT. Additionally, the NCCF and NAFED have been directed to procure 1 LMT of onions each. This strategic procurement, coupled with controlled distribution of the procured stocks in major consumption areas, aims to meet the increased procurement target.

Moreover, the government intends to gradually expand the retail sale of onions by collaborating with other agencies and e-commerce platforms. Interestingly, just eight days ago, the Department of Consumer Affairs had taken market intervention measures by releasing onions from the government’s buffer stock.

The government’s decision to subsidize onion prices is rooted in the desire to prevent a recurrence of the unprecedented inflation observed in tomato prices, which had surpassed Rs 200 in certain markets. To counter this trend, the Department of Consumer Affairs had previously intervened to provide tomatoes at subsidized rates.

The inflation rate, as gauged by the Consumer Price Index (CPI), surged to a 15-month high of 7.44 percent in July, primarily driven by elevated vegetable and cereal prices. Similarly, the Consumer Food Price Index (CFPI), accounting for nearly half of the CPI, spiked to 11.51 percent in July, a marked increase from the 4.49 percent recorded in June. This surge in CFPI was largely attributed to soaring vegetable prices, particularly tomatoes.

With impending elections in three states and the Lok Sabha elections next year, food inflation presents a significant concern for the Narendra Modi-led government. Throughout the year, the government has implemented various measures to counter the escalating prices of key commodities such as cereals, pulses, edible oils, and vegetables.

To address the situation, the government has employed an array of strategies, including direct market intervention, adjustments to import-export policies, and imposition of stock limits. These measures are being utilized to combat inflation, exacerbated by factors such as adverse weather conditions, the El Nino effect, and geopolitical dynamics.

Former Agriculture Secretary Siraj Hussain highlighted that the prevailing challenges primarily stem from adverse weather conditions earlier in the year. These conditions have adversely affected the production of various agricultural goods, resulting in food inflation. He acknowledged the government’s valid concern about the impact of food inflation on core inflation and justified the measures taken to bolster domestic supply. However, he cautioned that India’s agricultural surpluses are modest, implying that similar challenges could arise in the future.