Enhanced government procurement may provide temporary relief, but Maharashtra’s recurring onion crisis points to deeper structural flaws in India’s agricultural marketing architecture
For onion grower Baban N. Fand of Ahilyanagar district, the arithmetic no longer adds up. Having cultivated onions across three acres of his farmland, Fand finds himself confronting a familiar dilemma that has become an enduring feature of Maharashtra’s agricultural landscape. Even as governments announce procurement drives and relief measures, the economics of onion cultivation continue to deteriorate.
“The procurement price (of Rs15 per kg) should have been linked to production costs and, more importantly, announced at the time of harvest,” says Fand. “Today, it stands at Rs20 per kg. Three months later, after storage losses in weight due to the dried-up produce, labour expenses and transportation costs, the farmer is no longer selling the same quantity of produce.”
The remark captures the frustration simmering across Maharashtra’s onion-growing belt, where a sharp fall in prices has once again exposed the vulnerabilities of a crop that occupies a peculiar place in India’s political and economic imagination. A spike in onion prices can embarrass governments. A collapse in prices can devastate farmers. Yet, despite decades of recurring crises, a durable solution remains elusive.
The latest downturn has prompted the Union government to announce procurement through NAFED and NCCF at support prices intended to stabilise the market. Maharashtra Chief Minister Devendra Fadnavis has also urged the Centre to expand procurement volumes from state government-enhanced 300,000 tonnes to 1 million tonnes. But, while the intervention may ease immediate distress, questions remain over whether it addresses the deeper structural problems confronting onion cultivators.
According to Pravin Darade, principal secretary, co-operation & marketing, Maharashtra, the Centre had assigned procurement targets of 100,000 tonnes each to NAFED and NCCF, taking the total procurement commitment to 200,000 tonnes. This has been enhanced this year to 30,000 tonnes, he adds.
“The objective is to bring stability to onion prices in the market, so that farmers receive relief,” says Darade. The state government has also sought an enhancement of the procurement quota from the Centre.
Officials point out that there is at present no export ban or export duty on onions. Yet, external developments have compounded the crisis. Disruptions to shipping routes and uncertainties arising from geopolitical tensions in West Asia have affected export movement, limiting one avenue through which domestic surpluses could have been absorbed.
Problems of plenty
However, critics argue that the intervention addresses only a fraction of the problem. Maharashtra’s onion surplus this season could be in the range of 800,000 to 1 million tonnes beyond immediate domestic absorption requirements, estimates Vijay Gaikwad, former member, chief minister’s onion policy committee.
“Procuring 200,000 tonnes addresses only a part of the overhang,” he observes. “The remaining surplus continues to exert downward pressure on mandi prices.” Gaikwad is particularly sceptical of claims that larger absorption volumes may eventually materialise. “Claims of 1 million tonnes of absorption sound reassuring, but the operationalised procurement mandate remains significantly lower. More importantly, procurement without processing infrastructure merely transfers the problem from the farmer’s field to a government warehouse.”
His criticism points towards a contradiction increasingly evident within India’s agricultural economy. India is the world’s second-largest producer of onions and generates substantial annual surpluses. Yet, despite this production strength, the country accounts for only a modest share of global onion exports, pegged at about 30 per cent. Successive export restrictions, policy uncertainty and inadequate processing infrastructure have prevented India from fully leveraging its production advantage in international markets.
The consequence is that, whenever domestic production rises sharply, farmers rather than markets absorb the shock. The recurring nature of the crisis suggests that the problem extends beyond seasonal fluctuations.
Maharashtra contributes roughly one-third of India’s onion output. In districts such as Nashik, Ahilyanagar, Solapur and parts of Pune division, onion cultivation has evolved into an economic lifeline for thousands of small and marginal farmers. Ironically, periods of prosperity often sow the seeds of future distress.
When onion prices rise significantly in one season, farmers expand acreage the following year, in pursuit of higher returns. With little coordinated crop planning and limited real-time market intelligence, production frequently overshoots demand. Also, the agricultural portal of the state government has deliberately deleted data on crop cultivation over the previous five years, another farmer affirms.
“The glut is structurally created,” argues Gaikwad. “Every farmer responds rationally to last season’s prices. Collectively, however, those decisions produce excess supply.” And, the problem is amplified by the perishability of onions.
Unlike cereals that can be stored for prolonged periods, onions present farmers with a narrow selling window. Even stored rabi onions lose weight over time through dehydration. Farmers incur additional expenses related to storage, labour and transportation, reducing realised returns.
Erosion of farmer income
Fand estimates that storage losses, handling expenses and transport costs can significantly erode farmer incomes even before produce reaches the market. The situation is particularly challenging when market prices fall below production costs. Real-time costing at Rs20 today, when the state government has announced Rs15 per kg as procurement price, upping it from Rs12, is needed, he says, adding, “Another three months from now, the farmers’ cost per kg of unsold stock will be Rs25.”
Reports from onion-growing regions indicate that many farmers have struggled to recover cultivation expenses after accounting for seeds, fertilisers, labour, irrigation and post-harvest handling. In some instances, transportation expenses have reportedly exceeded the value realised from sales. Yet, government officials maintain that diversification offers a more sustainable solution than repeated intervention.
India produces about 35 million tonnes of onions annually, while domestic consumption remains substantially lower, notes Darade. “We cannot continue increasing onion production indefinitely,” he says. “Farmers need to diversify crops.”
The recommendation, however, is easier made than implemented. Agricultural officials routinely advise farmers to shift towards pulses, oilseeds or alternative horticultural crops. But farmers often perceive these alternatives as carrying equal or greater risk.
A farmer moving from onions to pulses, for instance, may find himself confronting uncertain procurement arrangements, volatile prices and weaker market networks. In contrast, onion – despite its volatility – offers a well-established marketing ecosystem and political visibility that frequently results in government intervention during crises.
This has created what some analysts describe as a policy paradox. Repeated government interventions may provide temporary relief, while simultaneously reinforcing farmer dependence on a crop prone to recurring boom-and-bust cycles.
No value addition
The challenge extends beyond production choices. Several officials within Maharashtra's finance and co-operative sectors argue that the state has focused excessively on production support, while neglecting value addition.
India's dairy sector offers a useful comparison. Milk is highly perishable, yet co-operative networks, processing facilities and diversified product lines have created multiple revenue streams similar to the mango produced in the Konkan belt. The same logic, they argue, has never been adequately applied to onions.
"Onion powder, dehydration facilities, processed foods and export-oriented value chains remain underdeveloped," observes one senior official. "We help farmers grow crops, but not necessarily sell them profitably."
The argument resonates with economists, who contend that India's agricultural support architecture remains overwhelmingly production-centric. Fand, our simple farmer from Ahilyanagar, simply puts it this way, “The government should offer up to 90 per cent subsidy to entrepreneurs setting up such food processing units and surely the suggested value-added ecosystem will emerge.”
Schemes ranging from direct income support to crop insurance and input subsidies assist cultivation. Far less attention has been devoted to post-harvest infrastructure, processing industries, cold-chain development and market intelligence systems.
Farmer-Producer Organisations (FPOs), frequently projected as a solution to fragmented agriculture, have similarly delivered mixed results. While hundreds of FPOs have been registered across Maharashtra, many continue to struggle with inadequate capital, weak managerial capacity and limited access to storage and processing facilities.
Without viable buyers and market linkages, institutional structures alone cannot transform farmer incomes. The debate becomes even sharper when viewed alongside Maharashtra's wider rural support ecosystem.
Successive governments have announced loan waivers, income-support measures and welfare schemes intended to alleviate agrarian distress. Yet, officials themselves remain divided over their long-term efficacy.
Some bureaucrats argue that repeated farm loan waivers have largely benefited financial institutions (co-operative banks controlled by politicians), while creating expectations of future write-offs – like the impending third farm loan waiver by June end, which will result in a payout of close to Rs35,000 crore. Others contend that direct-benefit-transfer programmes have strengthened rural household finances and improved social outcomes.
The onion crisis highlights this larger dilemma. Governments frequently intervene after distress becomes visible. What remains missing is an institutional framework capable of anticipating and mitigating volatility before it reaches crisis levels.
Experts advocate several measures, including automatic procurement triggers linked to market prices, predictable export policies, expanded processing capacity, cold-chain infrastructure and more sophisticated crop-planning advisories. Particularly important is the creation of demand buffers through dehydration and processing industries capable of absorbing surplus production during glut years.
As Gaikwad notes, procurement alone cannot create value. At best, it postpones the problem. Back in Maharashtra's onion-growing heartland, farmers are less concerned with policy theory than with economic survival because, here, water availability remains uncertain; input costs continue to rise; and price volatility shows little sign of abating. Onion farmers are mostly middle-class and marginal agriculturists – the most vulnerable segment of food producers.
Yet, despite recurring crises, onion cultivation persists because alternatives remain equally uncertain. That reality perhaps explains why Maharashtra's onion story continues to repeat itself. The state's farmers have demonstrated their ability to produce abundance. What remains unresolved is whether India's agricultural institutions can create a system capable of rewarding that abundance rather than punishing it.
Until then, every bumper harvest risks becoming a burden, and every onion crisis merely another chapter in a familiar cycle of prosperity, glut and distress.