Onion prices a cause for tears in India

Onion crisis in 2010 saw ban on onion exports, low import taxes and even trucking in onions from arch-rival Pakistan.

MUMBAI: The cook tosses a generous fistful of diced carrots, cabbage and celery into the crackling oil at a food stall on a Mumbai sidewalk, before reluctantly adding a meagre sprinkling of onions.

"I just cannot afford to add more," says Govind Ram as one of his chefs whips up a serving of the signature "vegetable manchurian dry" - a dish reliant on a heavy dose of red and spring onions for its flavour.

Ram, who owns the Dragon's Corner street stall in south Mumbai, usually gets through 45 kilos (99 pounds) of onions each month.

But with prices having more than doubled since the start of the year, he has had no choice but to rethink his ingredients.

At roadside stalls and supermarkets, customers are paying as much as 28 to 40 rupees (55-75 cents) per kilo for onions, an eye-watering rise from December when costs were around 10 to 15 rupees.

While food prices have risen across the board in India, the cost of an onion has increased more dramatically than any other staple, government data showed this month.

"It really hits the lower income (groups) very hard, who spend a sizeable portion of earnings on food. It is pinching them every day," said Devendra Pant, chief economist with India Ratings, a branch of Fitch ratings agency.

Such high costs, along with general food inflation of around 12 percent, are a potent problem for the Congress Party-led government as it bids for a third consecutive term in a general election early next year.

Onions may not be the most vital source of nutrition but they are regarded as essential to spice-loving palates, which -- when dissatisfied -- can play a crucial hand in politics.

Back in January 1980, Indira Gandhi strode back to power with the help of rising onion prices, waving huge strings of them at campaign rallies and saying that a government has no right to govern if it cannot control onion costs.

Eighteen years later, an election defeat for the ruling Delhi state government was blamed in part on a six-fold surge in onion prices.

Politicians are already falling out of favour with the latest price hikes.

"The government just does not care for us or what we think," said Sumathi Arogyanathan, a 45-year-old housemaid living in a Mumbai slum.

"Earlier several meals included onions for vegetables and the occasional fish. Now it's just once a week. Now often we have 'podi' - a dry spiced lentil powder -  instead of vegetables with rice," Arogyanathan said.

Traders in the western state of Maharashtra, one of India's main onion bowls, say prices are up due to a combination of erratic weather conditions, late arrival of supplies, sustained demand and rising production costs.

But a recent report conducted for the fair trade regulator, the Competition Commission of India, said traders' cartels and hoarding were affecting the cost of onions, 15 million tonnes of which are normally consumed each year.

An "onion crisis" of soaring prices in 2010 saw Prime Minister Manmohan Singh's administration step in forcefully, banning onion exports, scrapping import taxes and even trucking in onions from arch-rival Pakistan.

This time, again wary of how onion prices influence public opinion, New Delhi is keen to be seen taking action.

Economists expect the government to outline some incentives or measures in the federal budget on Thursday in a bid to improve supplies, reduce wastage and so bring down the prices of fruit and vegetables.

"India has typically always adopted a 'fire-fighting' approach -- when a fire erupts, we will douse it," said Dharmakirti Joshi, chief economist with ratings firm Crisil.

Delhi's Chief Minister Sheila Dikshit has told the food and civil supplies department to "take action against hoarders", while the national railways minister has promised more wagons to speed up supplies.

But without long-term, systemic solutions, onion prices may stay high for some time yet.

"They cannot ignore this anymore, it has to be tackled," Joshi said.