Kaushik Basu: Trader cartels are responsible for high onion prices
January, 06th 2011
Top economic advisor in the finance ministry on Wednesday blamed cartels among traders for the skyrocketing prices of onion. There are forms of implicit cartels working among the traders that block the movement of new entry, the appearance of new players, chief economic advisor Kaushik Basu said while explaining the reasons behind the onion price rise.
The price of the vegetable, which is ruling at Rs 60 per kg, went up to Rs 80 per kg last fortnight. One important question (that) arises (is) why the profit making traders are not buying (onions) from villages and selling in cities to equalise this huge price difference between the two, Basu said at the Skoch Summit.
He said that rise in onion prices is not really a matter of monetary or fiscal policy. It is much more to do with product supply, supply chain in particular when you get such a high price differential between retail outlet in cities like Delhi and farm gate prices, he added.
He said India may have to live with rising food prices, indicating that price pressures in the economy are here to stay for some more time. Food inflation has accelerated well above the 14%-level in mid-December and is likely to rise further as the full impact of a recent spurt in the prices of vegetables like onions is reflected in food inflation.