The government has recently raised the minimum assured procurement price (MAPP) for onions under the Price Stabilisation Fund (PSF) scheme to Rs 1,730 per quintal from Rs 1,650 per quintal. The second hike in last 10 days aims to support farmers and build buffer stocks to address potential shortages and price volatility. However, farmers argue the revised price still doesn’t cover production costs.
According to stakeholders, Maharashtra onion farmers face structural constraints and policy uncertainty. Limited summer water leaves many regions in the state with few viable crop alternatives, making farmers heavily dependent on onions for income, they say.
Increasing input costs and storage issues further amplify the risk. The estimated production cost of a kg onion is around Rs 20; storage for 3-5 months adds another Rs 5 per kg, taking the total costs to nearly Rs 25 per kg, without even accounting for handling, sorting, and spoilage losses.
Despite the increases in procurement prices, many onion farmers are reportedly being forced to sell at just Rs 10-12 per kg, incurring substantial losses. As per data, the average price at mandis during January-May 2026 was lower than Rs 15-16 per kg compared to the corresponding period last year. This forced farmers to look for alternatives. But do they have any?
iStockFrequent policy shifts hurt
Anil Ghanwat, former President of Shetkari Sanghatana, a farmers’ association, says that Maharashtra’s onion dominance is eroding as Uttar Pradesh and Punjab expand cultivation. Currently, India needs nearly 15 million tonnes yearly for domestic consumption but produces nearly 30 million tonnes. Exports are vital to absorb that surplus, stabilise prices, and protect farmers’ incomes, but uncertain policies hurt farmers’ prospects, he says.
“Policy uncertainty destroys investment and long-term supply-chain planning. India’s global onion export share has plunged below 5% from nearly 40% earlier, as per industry estimates. Bangladesh, once 26% of our exports, cut reliance after the abrupt 2020 ban. It boosted domestic output, imported more seeds, and hiked duties to shield farmers. Shipments crashed from hundreds of trucks daily to a few,” says Ghanwat.The December 2023 export ban and duties till March 2025 left 2025-26 exports nearly 39% below 2022-23 levels, says Pushan Sharma, Director, Crisil Intelligence. Policy uncertainty hurt India’s credibility in key markets like Bangladesh and Indonesia, pushing buyers toward rival exporters. With exports absorbing less surplus, heavy domestic arrivals drove prices down harder, adds Sharma.
Former Agriculture Secretary Siraj Hussain says that the government periodically imposes export bans and other trade restrictions to shield urban consumers from sharp increases in onion prices. He believes the government “should have a stable policy” and “let the urban consumers pay market price for onions.”
An email seeking a meeting with the Ministry of Consumer Affairs to discuss issues related to onion pricing remained unanswered at the time of publication.
‘Buffer stock procurement has limited impact’
Onion farmers in Nashik, home to Lasalgaon, Asia’s biggest wholesale onion market, have protested NAFED and NCCF procurement operations, demanding the agencies overhaul practices or exit. Farmers call the grading norms opaque and subjective, leading to high rejection rates despite recent relaxations. The Department of Consumer Affairs thereafter widened Grade-A size to 35-70 mm from 45-65 mm and introduced Grade URS for stained, discolored, and sunburnt onions.
However, farmers say little has changed on the ground. The core complaint is opaque procurement. Farmer groups say they want all buying through open Agricultural Produce Market Committee (APMC) auctions. They also oppose subsidised buffer stock sales in cities, which crash prices and punish growers holding stock for better rates.
Ghanwat and other farmers also question the timing of government procurement. “Authorities stayed silent during price crashes but turned active as prices recovered. To curb future inflation, buffer stock procurement was expanded. Yet the procurement rates still lag market prices. Despite recent hikes and relaxed norms, allowing non-FAQ, sunburnt, black-spotted onions, private traders pay more, making government purchases unattractive,” they add.
They call for bringing in more private agencies alongside NAFED or NCCF to lift competition, price discovery, and value-chain investment.
According to official estimates, India’s onion production during 2025-26 is expected to reach 30.74 million tonnes (MT), only marginally lower than the previous year’s output of 30.77 MT.
To stabilise prices and cover shortages, the government aims to procure 2 lakh tonnes of onions this season via NAFED and NCCF. Procurement started May 15, with the Central Warehousing Corporation (CWC) handling storage across facilities. Despite these efforts, farmers argue that procurement volumes remain too small compared to national production and are insufficient to influence market prices meaningfully.
Sharma argues that buffer stock procurement has only a limited and short-term impact on onion prices. Analysis of mandi price trends over the past three years suggests that procurement helps cushion distress sales during the peak harvest period but does not alter the broader market cycle, he adds.
iStockIndia’s onion production during 2025-26 is expected to reach 30.74 million tonnes (MT), only marginally lower than the previous year’s output of 30.77 MT.
In 2025, mandi prices fell from about Rs 2,080 per quintal in January to Rs 972 per quintal in May. To absorb excess arrivals, NAFED and NCCF began procuring onions under the Price Stabilisation Fund (PSF) from mid-May, targeting 3 lakh tonnes at around Rs 1,575 per quintal. Prices subsequently recovered modestly to about Rs 1,200 per quintal during June-August. However, Sharma notes that the rebound coincided with a seasonal decline in rabi arrivals, indicating that supply-demand dynamics, rather than procurement alone, remained the primary driver of price movements.
“Procurement continues to be concentrated in select districts like Nashik, even within the major producing states of Maharashtra, which restricts coverage for growers in dispersed surplus clusters. Payment delays are also still reported at some procurement centers, reducing the practical value of the announced procurement price. Going forward, the effectiveness of the buffer-stock programme will depend not only on the announced price alone but also on execution depth,” says Sharma.
Need structural reforms
The government’s onion buffer stock programme remains one of its primary tools for market intervention. However, experts question whether procurement of 2 lakh tonnes (0.2 MT) can significantly influence prices when national production exceeds 30 MT.
Sunil Pawar, former managing director, Maharashtra State Agricultural Marketing Board (MSAMB), argues that meaningful price stability in the onion sector requires significantly higher procurement volumes, describing periodic government purchases as little more than temporary fixes.
Pawar calls for a stable export policy to restore buyer confidence and boost farmer incomes, with procurement prices linked to actual cultivation costs. He also seeks more scientific storage to cut post-harvest losses and prevent distress sales, stronger FPOs to improve bargaining power, and a greater private role in procurement and warehousing to drive efficiency. He also calls for higher investment in processing and dehydration to absorb surplus, plus real-time market intel on output, stocks, and demand. Pawar concurs that the government swiftly responds to a surge in consumer prices but hesitates when farmgate prices fall below cost. He argues that proposed purchases of 2-3 lakh tonnes are too small relative to national production.
Pawar backs a dedicated onion board for market intel, export promotion, and supply chain coordination. He wants more trader competition and wider e-NAM adoption, noting that a few traders often control price discovery in key markets. He also pushes for transparent pricing using weighted average market rates and a strong grading system, so farmers get fair value across onion qualities.
He points out farmers miss late-season price spikes because they have already sold their crops. Better storage, transparent markets, and real-time price data would help them capture more value. “Current policy is reactive,” he says. “It doesn’t address structural gaps.” Pawar’s solution is a long-term framework where surplus onions move freely to domestic and export markets, supported by transport subsidies and stronger market linkages.
Need robust pricing framework
According to former agriculture secretary Siraj Hussain, the government had constituted an expert body for the onion sector. He notes that procurement prices may have been determined using cost-of-cultivation data compiled by the National Horticultural Research and Development Foundation (NHRDF), which regularly collects information from farmers across onion-growing regions.
“There is often a difference in the cost of cultivation as presented by the farmers and that accepted by the government,” says Hussain. However, he believes that NHRDF’s methodology is likely to have captured the cost of cultivation reasonably accurately.
But other exports say more needs to be done in terms of strengthening the pricing framework.
Pushan Sharma, Director of Crisil Intelligence, says strengthening market intelligence and crop forecasting systems should be a key priority. That would allow procurement, buffer stock creation, and releases to be planned around expected production and supply-demand conditions.
“In years of surplus production, larger buffer stock procurement can help absorb excess arrivals and support farmgate prices. At the same time, buffer stock releases should be calibrated carefully and avoid significantly undercutting prevailing market prices, as this can discourage private storage and weaken farmer realisations,” adds Sharma.
Shashi Kant Singh, Partner-Agriculture, Food & Agribusiness, PwC India, says procurement decisions track mandi price trends and depend on storage and quality infrastructure availability. But the persistent gap between procurement prices and farmer expectations shows procurement alone can’t resolve the trade-off between remunerative returns for growers and food inflation control, he says.
“A more sustainable approach may lie in a multi-pronged framework encompassing effective demand-supply signals capture, predictable export policies, improved storage infrastructure, among others,” adds Singh.
A transparent, credible procurement system would boost buyer competition, improve price discovery, and give farmers confidence in gluts, say experts. The onion sector needs predictable policy, stronger institutions, and long-term infra investment, not repeated ad-hoc fixes for price crashes or spikes, they add.
“One important reform would be the implementation of the recommendation of the M S Swaminathan Commission, which proposed that farmers should receive a price that is at least 50% above the comprehensive cost of cultivation (C2+50%). Such a pricing framework would provide greater income security, encourage investment in better farming practices and technologies, and make agriculture more sustainable and attractive for future generations,” says RG Agarwal, Chairman Emeritus, Dhanuka Agritech.
Agarwal and other experts argue that procurement is effective only when farmers can sell their produce easily and transparently. He says announced prices alone are not enough and calls for a long-term strategy to address both price volatility and farmer profitability.
“India requires a stable and long-term agricultural export policy. Frequent changes in export regulations create uncertainty among international buyers and affect India’s reputation as a reliable supplier in global markets. A predictable export framework will help farmers benefit from global demand and improve price realisation,” adds Agarwal.