Onion prices double, stir up trouble in election year

"The government is already unpopular ... the onion price rise may be the last straw that breaks the camel's back."

BATTLING CORRUPTION, INFLATION

The coalition government faced a string of corruption scandals last year and is battling to get the sluggish economy back on track while trying to control inflation, with food prices rising 13 percent year-on-year in December.

"Until the next onion crop arrives, prices will remain high. It will definitely have an adverse impact on inflation," said Madan Sabnavis, an economist at CARE Ratings.

The Congress-led state government of Maharashtra, the top onion producer, is planning to act against hoarding and limit the amount of stock traders can hold, a state official said.

Traders are talking about a repeat of the 2011 export ban.

"The government can ban exports, start imports through state-run agencies. These measures can help a bit, but they can't pull down prices sharply," said a Mumbai-based exporter, who declined to be identified.

India, a key supplier to Asian and Gulf countries, exported 1.38 million tonnes in the first 10 months of the financial year from April 1, 2012, up 10.4 percent from a year earlier.

But the government may not have to intervene.

"Already exports are slowing due to higher prices. Pakistan is offering a steep discount compared to Indian quotes," the Mumbai exporter said.

What could make a difference would be to improve a creaky distribution system and storage. Post harvest losses account for nearly 30 percent for all vegetable production.

"Every year, improper handling and storage leads to large scale wastage. If we minimise the wastage, we can arrest price rise," said Bhonde of the Horticultural Foundation. ($1 = 53.2850 Indian rupees)

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