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New Delhi, Dec. 23: Onions are causing all the eyeburn but government data suggest vegetable prices are marching together, dragging food inflation back into double digits at 12.13 per cent in an unseasonal phenomenon.
Food inflation galloped at an unusually high rate of 2.67 percentage points for the week ended December 11, deepening the lines on the brows of Prime Minister Manmohan Singh and his aides already scrambling to contain an onion sting.
Finance minister Pranab Mukherjee said: I am afraid there has been some upward movement of food items.... Of course, weekly fluctuations take place and one of the reasons may be the high prices of onion, (about) which (we already) have taken steps.
Some upward movement might be seen as an understatement in the context of the extent of rise in food inflation — from 9.46 to 12.13 per cent — and government officials promises of moderation for months. Analysts said the rise in vegetable prices in general was a signal that the crisis was spreading from onions to other produce.
N.R. Bhanumurthy of the National Institute of Public Finance and Policy said: General speculative activity seems to be playing a major role in the spike in vegetable prices. Onion and potato are sensitive commodities and a spurt in their prices affects the prices of other vegetables.
On an annual basis, onions have become costlier by 33.48 per cent while vegetables have turned 15.54 per cent dearer. Prices of fruits and milk have jumped 20.15 per cent and 17.83 per cent.
The analysts said the onion crisis showed the failure of supply-side management as production shortfall was marginal. In late October, Nafed, the government importing agency, placed an order for just 650 tonnes of onion from Pakistan and 2,000 tonnes from China despite warnings that the crop would be affected. Officials said they had not anticipated hoarding and price ratcheting, though these are the factors blamed in every crisis.
Trucks carrying onions are snaking their way to the Wagah border post from Pakistan now as traders there seem eager to sell to India, lured by higher prices, despite a shortage at home.
Khalil Bhatti, a leading Lahore trader, told PTI: About 400 to 500 tonnes of onions are being sent across the border daily from Wagah at the rate of between Rs 44 and Rs 48 a kg.
Had imports been tied up earlier in expectation of shortage, the crisis would not have occurred in the first place.
Commerce minister Anand Sharma said the loss of one million tonnes of onion in Maharashtra, along with hoarding by some traders, had caused prices to shoot up. Not a single onion will be allowed to go out of the country. Hoarders will be forced to bring it back to the market because they will not be allowed to export it, Sharma said.
Officials said government trading agencies were looking at the option of importing around one million tonnes of onion.
If what analysts are warning about is correct, mini-crises could be breaking out in other food produce, too. The analysts said market sentiment and crop failure in commodities like tomato in parts of the country were nudging vegetable prices up. Tomato is selling for Rs 40 at the retail level compared with Rs 15-20 earlier in the month.
R.P. Singh, the secretary in the department of industrial policy and promotion, said: Fifty per cent of the food inflation is because of fruits and vegetables. Once we are able to control vegetable prices, we will be able to control the overall expectation.
Abhijit Sen, Planning Commission member, said: Normally, prices of vegetables come down during this season, but something is affecting it, perhaps the onion sentiment.
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