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The country's onion market, dictated by traders, has clear imperfections, including cartelisation and hoarding, that affect price of the agricultural commodity, a Competition Commission of India (CCI) study has said.
There are "clear imperfections in the onion markets and presence of interested cartels", it said.
Bangalore-based Institute for Social and Economic Change conducted the study for the fair trade regulator. The report, which looked at competitiveness in major onion markets of Maharashtra and Karnataka, was submitted to the regulator in December.
The results of seasonal indices, correlations, daily, monthly arrivals their prices etc. indicated the existence of anti-competitive elements in the onion markets.
"A few big traders having well-connected networks with market intermediaries in other markets seem to play a major role in hoarding for expected high prices," said the findings, released recently.
According to the report, the market structure of onion is unilaterally dictated by the traders, not farmers. The minimal role of farmers in price discovery due to the low size of average farm holdings (1.15-1.3 acre), unfavourable weather conditions and price risk are cited as major reasons for the situation.
"Most of trading is in the hands of commission agents and traders... Lack of trading expertise, market knowledge and risk-bearing capacity has prevented most farmers from making any dent in onion trading," it noted.
The report stressed that changes in onion prices have a huge impact on food security, farmer and consumer welfare.
"Factors such as significant marketing costs, lack of market infrastructure, control of trade in the hands of few traders, restricting entry for new traders, ferquent strikes by market functionaries, etc. can also be responsible for the high prices of onion," it said.
During the agricultural year 2011-12, onion was grown in an area of 1.04 million hectares with a production of 15.75 million tonne.