Onion prices, muted through the agri commodities rally in the first half of 2008, have doubled in July and is set to flare in the second half on an expected drop in output, traders and officials said.Wholesale average price in the country’s largest onion trading hub in Lasalgaon, Maharashtra, was 880 rupees per 100 kg on Tuesday, from 431 rupees on June 30.
Onion, a major ingredient in Indian food, and a politically sensitive commodity, is typically cultivated thrice a year -- in monsoon, winter and summer.
"Lower rainfall has delayed cultivation and it will also cut acreage in the current kharif (summer-sown) crop," Satish Bhonde, additional director, National Horticultural Research and Development Foundation (NHRDF), told Reuters.
The kharif output in 2008/09 may fall by 41 percent to 1 million tonnes from 1.7 million tonnes a year ago, Bhonde said.
Onion output in the year to March 2008 was likely to rise 11.9 percent to a record 7.45 million tonnes, according to NHRDF estimates, which kept a lid on prices till now.
The kharif crop arrivals usually start from mid-August but cultivation has delayed by nearly two months due to scanty rains, Bhonde added.
Rise in onion prices usually gives opposition parties an opportunity to put the ruling front on the mat and gather votes in India.
In 1998, the ruling Bharatiya Janta Party suffered heavy losses in a key state poll, widely blamed on high onion prices. Onion prices, a staple for most Indians, brought inflation undisguised to the poorest homes.
India’s annual inflation rose to a 13 year high of 11.91 percent in early July, helped by higher food prices. Onion might now contribute, more dangerously.
"Prices are unlikely to cool in next few months. In crisis, people cut consumption of water, electricity. Now they should do the same with onion," Bhonde said.
"Farmers are slowly releasing stored crop and arrivals have dwindled. Wholesale price may rise to 1,700 rupees in next two months," said Vilas Bhujbal, a Pune-based trader.
Rajasthan in the west, and Haryana and Punjab in north India may see a rise in acreage under the bulb in current season, but major producers- western Maharashtra and Gujarat and Andhra Pradesh and Karnataka in the south - may see a sharp drop in acreage, Bhonde said.
India is the second biggest producer of onion in the world and major exporter in south Asia.
"Lower rains have been diverting farmers towards other crops, which requires less water," said D. Y. Bholkar, a trader from Nashik, a major producing region in Maharashtra.
In 2007 the government had restricted exports to rein in prices, but revoked it when prices slumped in early 2008.
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