Onion prices have become a major concern for households as retail rates reach ₹70 per kilogram. However, farmers receive only around ₹20 for the same produce. Earlier in May, reports claimed farmers received just ₹1 for onion purchases. At that time, consumers still bought onions around ₹35 per kilogram.
Now, customers pay almost double prices, while farmers continue receiving much lower rates. This price gap raises questions about the journey between farms and kitchens.
Why Farmer And Consumer Prices Remain Different
Farmers usually sell onions directly from fields to local markets or traders. The price received there reflects the farm or mandi-level value. Afterward, onions move through several stages before reaching consumers. Local traders purchase the crop and conduct sorting processes.
Later, onions get separated according to quality. Traders then send them to larger wholesale markets.
Furthermore, onions travel through city markets, vegetable mandis, and retail shops. Each stage adds transportation, storage, packaging, sorting, and business margins.
Additionally, diesel costs, truck charges, toll taxes, and transport time influence final prices. Even a few rupees per kilogram become a major expense during large-scale movement.
How Supply Chain Costs Increase Onion Prices
Farmers do not sell onions at ₹20 and traders directly sell them at ₹70. However, the gap between both prices remains significant.
The entire onion harvest does not have identical quality. Markets separate smaller, damaged, or spoiled onions from better produce. Consequently, traders recover purchase costs and expenses from the remaining sellable stock. This process increases the per-kilogram cost. Moreover, onion prices differ according to size, appearance, and quality. Larger and better-looking onions usually receive higher prices.
Unlike grains, onions cannot remain stored without damage for long periods. Moisture, heat, and poor storage conditions can spoil the stock.
Therefore, traders who lose part of their stored onions may increase prices. This helps them recover losses caused by wastage.
Multiple Traders Create A Bigger Price Difference
The onion journey usually involves several people between farmers and consumers. These include local buyers, commission agents, mandi traders, wholesalers, and retailers. Each participant adds expenses and profit margins according to their role. As a result, the farmer’s price and customer’s price become widely different.
The gap becomes larger when production declines in any region. Delayed supply from other areas can also increase market pressure.
Additionally, large stock holdings by some traders may affect availability. When supply reduces, prices can rise further.
Why Retailers Sell Onions At Higher Rates
A retailer selling onions at ₹70 does not necessarily buy them at ₹21 per kilogram. Retailers often purchase onions at higher city wholesale market rates. After buying, they add transportation costs, shop rent, worker expenses, electricity bills, spoilage losses, and profit margins. Since retailers sell smaller quantities, their per-kilogram expenses can remain higher than wholesalers. Furthermore, when onion prices fall, some traders and commission agents store crops in warehouses. They avoid selling immediately in low-price conditions.
Later, when markets face shortages, these traders release stocks. This can increase onion prices as demand rises.
Why Farmers Often Sell Crops At Lower Rates
Farmers often sell onions soon after harvesting because they lack sufficient storage facilities. They also need money for future farming expenses. Additionally, farmers must prepare land for the next crop. Therefore, immediate cash requirements influence selling decisions.
Although farmers carry major production risks, they often fail to receive benefits from rising market prices.
