The Indian government has announced another increase in the procurement price for onions, raising it by 13 per cent to ₹2,125 per quintal. This move marks the fifth consecutive hike in the current procurement cycle, as authorities aim to shore up buffer stocks and protect both farmers and consumers from volatility in onion prices.Buffer stocks as a tool to control market volatilityPrice Stabilisation Fund (PSF), which underpins this procurement, is designed to allow the government to intervene in the market during periods of supply disruption or sudden price surges. By maintaining a reserve of onions and other staples, the government can release stock into the market to temper sharp price increases and avoid shortages.Early season challenges and procurement strategybuffer stock in early June, government agencies have struggled to meet targets. Only around 2,000 tonnes had been purchased as of early July, even after four previous upward adjustments to the procurement price. The price was initially set at ₹1,270 per quintal and raised successively to ₹1,580, ₹1,725, ₹1,875, and now ₹2,125 per quintal. Each hike is intended to make procurement more lucrative for farmers, who otherwise might sell their produce to private traders at higher prices.Weather concerns and market effectsMinistry of Consumer Affairs, these weather-related uncertainties have contributed to speculative trading activity, although actual demand at major consumption centres has not shown a significant uptick. Despite these conditions, the ministry has assured that the overall supply of onions remains comfortable, suggesting that the recent increase in prices is consistent with the usual seasonal pattern rather than a sign of acute scarcity.Key producing states keep supply steadyGovernment aims to reassure farmers and consumersImplications for the coming monthsLooking ahead: balancing interests in an unpredictable market
- Policy & Rural Economy
- 3 min Read
Government hikes onion procurement price for fifth time this season to strengthen buffer stocks
India's government has raised the onion procurement price for the fifth time this season, aiming to boost buffer stocks and counter price volatility as weather concerns loom. The move highlights a proactive approach to securing farmer incomes and consumer prices amid an uncertain monsoon.