Everything you wanted to know about onion cartels but were afraid to ask

Onion crop in India is produced in three periods. The two large produces are in December and April and a small crop comes in October. The December crop is the time when prices normally fall and consumers have a good time with low Onion prices.

The cartel keeps a low profile during this time frame where they let the entire December crop flow into the market, thus creating a scenario of abundance, low prices and consumer happiness. They then wait for the next crop in April. The significant factor here is that there is no crop after April till October and the October crop is always a small one.

This is when the onion cartel starts mopping up all the supplies that are coming into the markets in the month of April and early May. Farmers get their typical Rs 6-10 per kg as the middleman network keeps the prices down till the time the supply from the farmers is exhausted. On an average the cost to the onion cartel comes to Rs 8-10 per kg.

Subsequently the aim of these large onion traders, or onion cartel,  is to hold on to the produce in their warehouses and cold storages for a period of 3-4 months. The cost of storage comes to around Rs 2-3 per kg. A 30 per cent wastage in storage is also accounted for.

Onion crop degrades very fast as it takes time for the crop to be stored post-harvest. Considering all these expenses, the cartel’s average cost of procuring and hoarding onions works out between Rs 13-Rs 18 a kg. By early June, the supplies start dwindling and prices start shooting up.

The cartel makes full use of technology in order to track the stocks position and to estimate the kind of levels to which prices can be ramped up. By August/September, the prices are up by at least 100% over their buying price. By August the market is ripe enough for onion prices to cross beyond Rs 25-Rs 35 a kg. By August the cartel starts to offload their stocks into the markets, often making a neat 100 per cent margin and more.

Between August and October when a smaller amount of fresh produce comes in the market, the large onion traders have made a neat pile of profit.

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