Price volatility and major issues in demand and supply management of Onion in Gujarat

The present study was undertaken in Gujarat to find out the major factors affecting onion price volatility. India is not only the second-largest producer of onion in the world but also the major consumer. Though thereisalwaysasurplusproduction, fluctuating domestic and export demand often creates demand-supply mismatch leading to a spiral effect on the prices of onion. The price spikes of onion in many ways cannot be explained fully by the fundamentals of demand and supply. All the stationary series which is obvious from the fact that calculated values (−5.46 to -5.78) for all the markets were less than the critical value (4.01) and were free from the consequence of unit root. The results of the Granger Causality Test depicted that most of the markets had bidirectional as well as unidirectional influences on onion prices. These markets are affected by the prices of each other. The high volatility in the price of onion (from Rs.1025 to Rs. 4525 per Quintal) was observed in all selected markets. Therefore, in order to continue the present system of market integration, there is a need to establish cells to generate market information and market intelligence which would provide a better platform for guiding the farmers in marketing their produce. The high inflation of food commodities cannot always be attributed to risks, exogenous shocks, and mismatch of demand and supply, it can also be caused by market inefficiencies, weak supply chains, and monopolies in the market. Therefore, there is a need for action against hoarders, remove the transportation bottleneck by making available railway wagons for transport and create regional storage to cater to the need of the region as per requirement.