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Traders suffer onion sting as prices stay firm

Against an increase of 80% in wholesale prices during June, prices have remained stable and in fact declined slightly in the second half of July.

, ET Bureau|
Last Updated: Jul 29, 2014, 12.37 PM IST
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Against an increase of 80% in wholesale prices during June, prices have remained stable and in fact declined slightly in the second half of July.
Against an increase of 80% in wholesale prices during June, prices have remained stable and in fact declined slightly in the second half of July.
PUNE: The fear of government action has helped keep onion prices stable this month and traders expect them to remain steady during the most of August too.

Though traders still believe that a shortage is bound to happen in September or October, the government's move to initiate imports is likely to put a cap on the extent of price rise during this period, they believe.

Against an increase of 80% in wholesale prices during June, prices have remained stable and in fact declined slightly in the second half of July. Most traders and sources at major markets in the country attribute the stability in prices to government action and a decline in exports due to international trade factors.

An elected head of one of the major onion markets said, “Trad ers are not in mood to hoard as the government has included the vegetable in the Essential Commodities Act." A major exporter of onion said, "There was no speculative price rise in July."

A big trader in the national capital said, "The measures taken by the current government have been responsible for taming the spike in prices. The previous government allowed exports to happen till August and took action only after wholesale prices reached Rs 45 per kg."

Though the government has imposed a minimum export price of $500 per tonne to discourage exports, trade sources attribute the decline in shipments during July to international factors. Onion is available in plenty in countries like Pakistan, Egypt and China and their quality is better than the Indian variety , thus reducing demand for Indian onions.

With the onset of the holy month of Shravana and Chaturmasa (a four-month period when the devout stay away from onion and garlic), domestic demand is likely to remain less in August.

"Wholesale prices may remain between Rs 15 per kg and Rs 25 per kg in August," said Sohan Bhandari, president, Nashik district onion traders association.

But traders believe that retail prices could be soar to Rs 100 per kg during September or October akin to the previous year. Growers as well as exporters and traders are not sure about the quality of the stored stock, which has been damaged by rains and hailstorm in March and April this year.

"The absence of rainfall for about six weeks had kept stored onions in good condition. It has been raining now and if they persist for a longer period, the increase in humidity can lead to a fast deterioration of stored onions," said Surinder Babu Budhdhiraja, a Delhi-based onion trader. Secondly , the delay in the sowing of kharif crops can also lead to shortages during September and October.

(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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