Panic grips Union govt as onion price hits Rs 100 a kg

Panic grips Union govt as onion price hits Rs 100 a kg

Dipak Kumar Dash & Tushar Pawar, TNN | Oct 23, 2013, 04.50 AM IST

NEW DELHI/NASHIK: With onion prices continuing to be on fire in the run-up to crucial state polls, an embattled government scrambled to stem the surge but appeared to lack a coherent plan. As onion prices, defying the sharp dip in the rates in the country’s biggest wholesale market at Lasalgaon in Nashik, continued to spiral and touched the Rs 100 per kg mark in the city and elsewhere, panic in the government was obvious. Food minister K V Thomas rushed to Maharashtra as the Congress-ruled state accounts for 28% of the total onion production and can help tame prices by cracking down on hoarders.Commerce minister Anand Sharma blamed hoarders for the spike in onion prices which political rivals have painted as the UPA government’s failure, and worse, insensitivity towards the poor.
The Congress government in Delhi, which rode the onion anger to power in 1998, was more precise as it shifted the blame on hoarders in BJP-ruled Madhya Pradesh. Civil supplies minister Haroon Yusuf alleged that hoarders were keeping supplies from reaching Delhi to sabotage Congress’s prospects in the assembly elections.
But beyond the anger, the central government did not seem to have any plan to deal with the crisis. Banning exports was considered only to be discarded after it was recognized that with domestic prices ruling high, few would have the incentive to sell abroad. “Banning exports may sound politically right but it will not be a good decision economically,” Thomas told TOI.
Onion imports from Egypt, Afghanistan and Pakistan were spoken of but going by the experience a couple of months ago when prices started shooting up, it may not prove to be beneficial. In the summer, imports from Pakistan were held up because of clearance problems at the Wagah border.
The crisis appeared to be man-made. On Tuesday, the average wholesale price of the new crop at Lasalgaon was Rs 3,900 a quintal, 37% cheaper than in the summer. Yet, the drop was not reflecting in retail prices.
Onion supplies to Delhi increased 10-15%, in the last 24 hours and brought down the price by Rs 100 quintal at the wholesale level.
But there was no let up in the price at the colony level, with prices touching Rs 100 a kg in many localities. Intriguingly, there was wide variation even within short distances, confirming the fear that hoarders could be at work. “This shows there is hoarding or delayed selling by traders to create artificial crisis,” said a government official.
Food minister Thomas said that he planned to meet agriculture minister Sharad Pawar and Maharashtra CM Prithviraj Chavan to discuss how to ease supplies from the state. This may not prove to be an easy task, considering not just the defiance that the hoarders have displayed despite dire warnings of a crackdown by functionaries at all levels.
What may prove to be more problematic is that in many cases, farmers are holding on to their stocks expecting better prices. Moving against them may be politically prohibitive. Farmers are far more powerful as a political constituency both because of numbers and the fact that they don’t carry the stigma attached to hoarders.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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