Article - 115 Week 45 The Tears & The Fears Of Onions

Article - 115 Week 45  

The Tears & The Fears Of Onions

Indian Onions are scary. They threaten Politicians, worry common man, drive farmers to extreme desperation, and above all make our container industry tango to the whimsical bans & restrictions on exports. Governments have fallen in the past due to wild price rises on onions and farmers have been financially ruined with abysmal drop in prices. And today the ghost of the past looms large on politics. Reason and good economics have taken the back seat. Draconian, pedestrian, and restrictive legislations are the order of the day. 

So fas as container shipping goes, onion is one of the cargo that helps reposition containers from export deficit ports in India to our richer neighbourhood - at throw away freights. With free flow of exports of onions both farmers and container shipping attain some level of stability and predictability. The export freight on onions may be very low, but the repositioning of the containers helps reduces the costs for the shipping lines, while the artificially low freight helps our farmers' competitiveness.  The costs of storage, idling equipments, & dead space on feeder ships are saved. This cost saving is indirectly passed on to freight rates on both imports and exports. The invisible hands of Adam Smith's free market does it in the background. Any obstructionist move by the government policy on free exports of onions, results in throttling the margins of the farmers, increasing the costs of shipping lines and related industries, and above all puts large stamps of unreliability on Indian supplies to overseas buyers. In fact, the objective of keeping prices of onions low for the domestic consumers by such obstructions is an illusion and adversely affects the very purpose. Such artificial depression of the price hits farmer hard. He bears losses and avoids growing them in future. Such massive abstaining of farmers for this crop, results in scarcity and price spikes. Such a situation has driven the prices so high that government has been forced to allow free imports of onions to cool the prices at home with huge forex losses. Keeping onions freely exportable and importable, will keep our farmers in a stable state to grow more. Wild fluctuations in prices will not happen. There will be a cost advantage to the shipping lines that would pass down to our other exports and imports costs. There would be no need for the government to intervene or fabricate stories to cover up for the wild spikes. The traders are so many in number that it is impossible for them to act in tandem to hoard for profiteering. Only in a controlled market, when the traders realise that price are going to go up because imports and exports are not free, there would be the tendency to hoard. Freedom boosts productivity. Restrictions boosts poverty.

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Brgds

Capt Rath