Indian Journal of Agricultural Economics

Volume 77, Number 4, October-December 2022

Trends and Price Behaviour Analysis of Onion in India

Anubhav Beniwal, Dharavath Poolsingh and Siddartha S. Shastry*
ABSTRACT

The study is undertaken to analyse the price behaviour and growth trend in the area, production and
productivity of onion in Lasalgaon market in Maharashtra and Bangalore market in Karnataka. For the study
of growth trend in area, production and productivity, regions of Karnataka, Maharashtra and the whole
country was selected. The time-series analysis is used to study the price behaviour and the compound growth
rate is used to study the area, production and productivity of the onion. The analysis indicated that
seasonality factor influenced the price behaviour of onions but was not the sole factor. Seasonality has some
influence on the price of the onion.
Keywords: Trend analysis, Price, Onion, Productivity, Growth, Seasonality.
JEL.: Q11, Q12, Q18

INTRODUCTION

Onion is the most important vegetable and commercial crop. Onion is consumed
around the year by people of all varieties in the world. It is valued for its distinct
pungent flavour and is an essential ingredient in the cuisine of many regions (Seth et
al., 2018). Onion is used either in raw form or dehydrated form to add flavour and taste
to Indian cuisines.
Onion has medicinal value it is used in some pharmaceutical preparation. The
pungency in onion is due to a volatile oil known as allyl-propyl disulphide. It
rejuvenates the body, removes toxins, revitalises the bloodstream and stimulates blood
circulation in the body (Tripathi and Lawande, 2006). Freshly extracted juice has
antiseptic and moderate anti-bactericidal properties due to the presence of several
sulphur compounds and is used as an inhaler in faintness caused by hysterical fits and
used to provide relief from sore throat too. Recent reports have suggested that onions
play some part in preventing heart diseases and other ailments (Corzo-Martínez et al.,
2007).
The composition of onion varies according to variety, agronomic and
environmental conditions of growth. It is a rich source of amino acids, anthocyanin’s,
flavones and phenolics (Pérez-Gregorio et al., 2014). The onion bulb is rich in minerals
like phosphorous, calcium and carbohydrate (Bhattacharjee et al., 2013). Common
onion ranks medium in the supply of proteins, caloric value and vitamin B and C. Also,

* Department of Applied Agriculture, Central University of Punjab, Bathinda, Punjab.

 TRENDS AND PRICE BEHAVIOUR ANALYSIS OF ONION IN INDIA 633

onions are a common source of folic acid. However small onions were more nutritive
than big onions. The nutritional composition of onion is given below in Table 1.
TABLE 1. NUTRITIONAL VALUE OF ONION (VALUES ARE IN PER 100 G EDIBLE PORTION)

(1) (2)
Energy 301 kJ (72 kcal)
Carbohydrates 16.8 g
Sugars 7.87 g
Dietary fibre 3.2 g
Fat 0.1 g
Protein 2.5 g
Vitamin B1 (Thiamine) 0.06 mg (5 per cent)
Vitamin B2 (Riboflavin) 0.02 mg (2 per cent)
Vitamin B3 (Niacin) 0.2 mg (1 per cent)
Vitamin B9 (folic acid) 34 mg (9 per cent)
Vitamin C 8 mg (10 per cent)
Calcium 37 mg (4 per cent)
Iron 1.2 mg (9 per cent)
Manganese 0.292 mg (14 per cent)
Phosphorus 60 mg (9 per cent)
Potassium 334 mg (7 per cent)
Source: National Horticulture Board.

Onion cultivation is widely practised across the globe with an estimated area of 5.4
million hectares and 104.5 million tonnes of production (FAO, 2020). India, China,
USA, Egypt and Turkey are the top five onion producing countries in the world.
According to FAO data (2020), India ranks first in area (1.4 million hectares) followed
by China (1.08 million hectares). In production, India contributes 26.7 MT of world
onion production followed by China at 23.7 MT (Table 2). Even though the largest
onion producer, India significantly lags behind in productivity. The Republic of Korea
with the highest onion productivity of 79.61 tonnes/ha in the world followed, by
Australia (54.66 tonnes/ha), Spain (52.10 tonnes/ha) and Japan (49.31 tonnes/ha).

TABLE 2. TOP 10 ONION PRODUCING COUNTRIES IN THE WORLD

Sl. No. Country Area (hectares) Production (tonnes) Yield (kg/hectare)

(1) (2) (3) (4) (5)
1. India 14,34,000 2,67,38,000 18,645
2. China 10,85,340 2,37,23,552 21,858
3. USA 53,742 38,21,044 71,099
4. Egypt 89,018 31,55,649 35,449
5. Turkey 70,275 22,80,000 32,444
6. Iran 52,762 20,64,317 39,125
7. Pakistan 1,48,200 21,22,000 14,318
8. Bangladesh 1,85,273 19,53,800 10,545
9. Russian Federation 59,908 17,38,165 29,013
10. Brazil 47,487 14,95,618 31,495
Source: FAOSTAT Database (2020).

In India, the total area under onion cultivation constitutes about 15 per cent of the
total area under vegetables (DAC&FW, 2020). In India, onion is produced mainly in
634 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

the states of Maharashtra, Madhya Pradesh, Karnataka, Rajasthan, Gujarat, Bihar,

Andhra Pradesh, Haryana, Uttar Pradesh, Tamil Nadu and Telangana which together
constitute around 91.14 per cent (DAC&FW, 2020) of the total country production. In
the country, onion is cultivated mainly in three different seasons, viz., Kharif (21 per
cent), late Kharif (9 per cent) and rabi (69 per cent) (DAC&FW, 2020). Sowing of
rainy Kharif takes place during February-April in Southern India while in Maharashtra
and other parts takes place during May-June. And so, late Kharif is in August-
September and rabi is in October-November. Most of the farmers cultivate onion crops
in rabi season (69 per cent), then late Kharif (9 per cent) and least in Kharif season (21
per cent).
TABLE 1.3 PRODUCTION AND MARKETING CYCLE OF ONION

Season Transplantation Harvesting

(1) (2) (3)
Kharif July – August October- December
Late Kharif October -November January- March
Rabi December -January End of March-May

The price of onion generally remains in a limited band in the retail market from
January to June. Onion price starts to increase around September and October. The low
supply creates volatility leading to market distress causing a steep rise in the price of
onion that eventually affects the end consumers. In 2015-16 budget, the Government
operationalised a Price Stabilisation Fund for purchasing an agriculture commodity at
market prices and releasing the agricultural commodities in a market in case of price
rise. However, due to lack of infrastructure and efficient supply chain along with fiscal
constraints, it was not possible for the government to build a massive stock of
perishable commodities. Organisations like NAFED, the apex body of agri-marketing
co-operatives and the Small Farmers Agribusiness Consortium (SFAC) play an active
role in the storage of onions. In the year 2019, NAFED purchased about 56,000 tonnes
of rabi onion for selling in big cities to manage the onion prices better. However, it is
not easy to store perishable produce like onion for longer period. An adequate scientific
storage facility is required to check the supply volatility and steep rise in onion prices.
An analysis of price and market arrivals over time is important for understanding the
price fluctuation of onion in market. Fluctuations in market arrivals largely contribute
to the price instability of the produce. Market arrivals of onion depend upon area under
cultivation, production, productivity and exports. In order to devise appropriate ways
and means for reducing price fluctuations of agricultural commodities, there is a need
to have a thorough understanding of price behaviour over time and space.
In the above context the study aims to understand: (1) Price behaviour of onion in
the selected market and (2To study the trend in the area under cultivation, production
and productivity of onion in the selected region.
 TRENDS AND PRICE BEHAVIOUR ANALYSIS OF ONION IN INDIA 635

II

METHODOLOGY

For the present study, a two-stage purposive sampling was adopted. In the first
stage two largest onion producing regions were selected. Then in the second stage, the
largest market for onions based on the arrivals was selected. Based on the above criteria
the states of Maharashtra and Karnataka was selected for the study of the area,
production and productivity of onion cultivation. The Lasalgaon and Bangalore
markets were selected for the study of onion price analysis.
Time-series data on monthly prices of onions required for the study were collected
from a secondary source, i.e., from NHRDF (National Horticulture Research and
Development Foundation) website. The data on prices used for the study refers to the
modal prices in a month. Modal price is considered to be superior to the monthly
average price as it is closer to the actual price of the commodity market during the
month in a particular market. The data relating to monthly modal prices (Rs./qtl) were
collected for the period from 1996 to 2019 for the Lasalgaon market, and from 2004 to
2019 for the Bangalore market. Analytical tool like time series analysis was employed
to study of price behaviour and compound growth rate for the study of growth in the
area, production and productivity of onion.
All the calculations and analysis required for the study was done using statistical
software such as Microsoft excel and SPSS.

2.1 Time Series Analysis

A time series is a complex mixture of four components namely, Trend (Tt),

Seasonal (St), Cyclical (Ct) and Irregular (It). These four types of movements are
frequently found either separately or in combination in a time series. The relationship
among these components is assumed to be additive or multiplicative, but the
multiplicative model is the most commonly used, which can be represented as:

Monthly data: Yt = T x C x S x I
Yearly data: Yt = T x C x I

where,
Yt : Original observation at time period ‘t’
Tt : Secular trend at time period ‘t’
St : Seasonal variations at time period ‘t’
Ct : Cyclical movements at time period ‘t’
It : Irregular fluctuations at time period ‘t’
636 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

2.2 Compound Growth Rate

The growth rates for the area, production, productivity for studying the
performance of crop in India and export of onion (in terms of both quantity and value)
has been estimated using the exponential function or quadratic function as follows:

Y =a bt ei …. (1)

where,
Y= Dependent variable for which growth rate is to be estimated,
a and b are parameters of exponential regression,
a = Intercept
b = Regression coefficient
i = Time variable
e = Random Error
Compound growth rate will be computed using the relationship
Compound growth rate = CGR = (b -1) x 100

III

RESULTS AND DISCUSSION

To analyse the nature of intertemporal behaviour in prices, time-series data on

prices are necessary. A weekly or monthly observation of price has four components,
trend (T), cyclical (C), seasonal (S) and irregular (I).

3.1 Price Analysis of Onion in Selected Markets

Analysis of the trend component in monthly series of prices involves ascertaining

the general direction of the movement of prices over a period of several years. The
trends in price are the changes over years and are associated with changes in the
technology of production, input supply, infrastructure etc. The study of price trends
enables us to indicate the general direction of prices in different markets. In order to
ascertain, the long-run movements of onion prices in the selected markets, the model
price of the Lasalgaon and Bangalore plotted against time and trend line was plotted
and regression was used for ascertaining the growth rate significance and trend analysis
had shown that there was an increasing trend in both Lasalgaon and Bangalore markets.
The price was indicating an increasing trend clearly with a very high significance level.
CAGR is calculated from January 1996 to November 2019 for the Lasalgaon market
and is found to be 1 per cent with very high significance. Similarly, CAGR is calculated
from January 2004 to January 2020 for the Bangalore market is found to be 1 per cent
with a very high significance.
 TRENDS AND PRICE BEHAVIOUR ANALYSIS OF ONION IN INDIA 637

TABLE 4. TRENDS IN THE PRICES OF ONION IN THE SELECTED MARKETS

Market CAGR Significance

(1) (2) (3)
Lasalgaon 1.00 per cent 0.00 per cent
Bangalore 1.00 per cent 0.00 per cent
*Significance level of 99 per cent.

3.1.1 Seasonality in Prices of Onion in Selected Markets

Seasonal fluctuations are the changes that occur regularly every year during the
same period. Seasonal price variations resemble a cycle covering a period of 12 months
or less. The general pattern of general variation in prices i.e., lower prices during the
post-harvesting months and higher prices during the pre-harvest or off-season months
is a normal feature for many agricultural commodities and it is repeated year after year.
Some of the factors that affect the extent of seasonality in prices include the extent of
seasonal concentration in production, degree of the perishability of the commodity, the
cost of storage (including direct cost, losses in storage, and the risk involved), degree
of seasonality in consumption, facility of storage available to farmers or public
agencies, restriction imposed on traders in terms of stock limits (Chengappa et al.,
2012).
In order to check for seasonality, the model price from each market was subjected
to regression analysis with seasons as one of the input variables. The forecast of the
regression model has been plotted along with the actual model price from each market.
From the study of the chart, it was found that seasons have some influence on the price
of the onion in both the Lasalgaon and Bangalore markets. Also, from Table 5, with
the R square value too low and a high significance of approximately zero we can
conclude that seasonality is one of the factors in the price variation of onion at both
Bangalore and Lasalgaon markets.

TABLE 5. SEASONALITY IN THE PRICE OF ONION IN THE SELECTED MARKET

Market R square Significance

(1) (2) (3)
Lasalgaon 0.3709 1.09E-21*
Bangalore 0.3180 2.33E-10*
*Significance level of 99 per cent.
638 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

Chart 3.3. Seasonality of Lasalgaon Market.

Chart 3.4. Seasonality of Bangalore Market.

3.1.2 Cyclical Variations in Prices of Onion in Selected Markets

The term ‘cycle’ refers to the recurrent variations in time series that usually last
longer than a year and are regular neither in amplitude nor in length. Amongst all the
methods of arriving at estimates of the cyclic movements of time series, the residual
method is most commonly used (Naidu, 2013). Here, an attempt has been made to
examine the cyclical behaviour of onion prices in the major markets (Lasalgaon,
Bangalore and Kurnool) of India.
From the study for the plot of model price in both the market, it is found that there
is no cyclical variation of prices in onion in both Bangalore and Lasalgaon markets.

3.1.3 Irregular Price Fluctuations of Onion in Selected Markets

 TRENDS AND PRICE BEHAVIOUR ANALYSIS OF ONION IN INDIA 639

Irregular price movements represent that part of the behaviour of prices, which is
not systematic. A particular price movement may not recur in the future. No
generalisation can be made about such price fluctuations because of the irregularity in
their occurrence. The important factor responsible for such price movement is drought,
floods, strikes, elections, early and late arrival of the monsoon and various government
policies directly or indirectly affecting the production and consumption of onion.
There was no periodicity in the occurrence of irregular price fluctuation of onion
in the selected market. In Charts 1 and 2 we observe irregular price fluctuation during
September 2013 because of excess export of onions. Around, 40 per cent onions of in
total production were exported during 2012-13. Again, this problem came up during
the October and December months of the year 2019. This was due to the flood situation
in onion growing states of India. To handle price fluctuation later government imposed
a minimum export price.

Chart 3.1. Trend Analysis of Lasalgaon Market.

640 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

Chart 3.2. Trend Analysis of Bangalore Market.

3.2 Area, Production and Productivity Analysis of Selected Region

To study the area, production and productivity of onion in Karnataka, Maharashtra

and India, data is collected from the national horticulture research and development
board for the period 1981 to 2018. To study the area under cultivation of onion, the
production of onion and productivity of onion cultivation in the selected region mean
is calculated. To calculate the compound growth rate in the area, production and
productivity of onion in the selected region the data is subjected to regression analysis.
During the year 2018 in India, the area under cultivation of onion was 1284990
hectares, the production of onion was 23262300 metric tonnes and productivity was at
18.10 metric tonnes per hectare. The mean area under cultivation is 593800 hectares,
the mean production of onion is 8306300 metric tonnes and mean productivity is 12.6
metric tonnes per hectare. The area under onion cultivation in India grew at a CAGR
of 5.1 with a very high level of significance. The production of onion in India grew at
CAGR 6.8 with a very high level of significance. The productivity of onion cultivation
in India grew at a CAGR of 1.5 per cent with a very high level of significance.
During the year 2018 in Karnataka, the area under cultivation of onion was
1952800 hectares, the production of onion was 2986600 metric tonnes and productivity
was at 15.29 metric tonnes per hectare. The mean area under cultivation is 104900
hectares, the mean production of onion is 1139800 metric tonnes and mean
productivity is 9.3 metric tonnes per hectare. The area under onion cultivation in
Karnataka grew at a CAGR of 5.1 with a very high level of significance. The
production of onion in Karnataka grew at CAGR 8.1 with a very high level of
significance. The productivity of onion cultivation in Karnataka grew at a CAGR of
2.9 per cent with a very high level of significance. The area under cultivation of onion
 TRENDS AND PRICE BEHAVIOUR ANALYSIS OF ONION IN INDIA 641

in Karnataka grew at the same rate as the national growth rate of area under cultivation
of onion. Production and productivity of onion grew at a higher rate in Karnataka when
compared national growth rate during the period of study.
During the year 2018 in Maharashtra, the area under cultivation of onion was
1284990 hectares, the production of onion was 8854100 metric tonnes and productivity
was at 17.43 metric tonnes per hectare. The mean area under cultivation is 175000
hectares, the mean production of onion is 2443400 metric tonnes and the mean
productivity is 13.7 metric tonnes per hectare. The area under onion cultivation in
Maharashtra grew at a CAGR of 7.0 with a very high level of significance. The
production of onion in Maharashtra grew at a CAGR 7.0 with a very high level of
significance. The productivity of onion cultivation in Maharashtra grew at a CAGR of
0.3 per cent with a very high level of significance. The area under cultivation of onion
and production of onion grew at a higher rate than the national growth rate for the area
under cultivation and production of onion. But the growth rate of productivity for onion
cultivation in Maharashtra was lower than the national growth rate for productivity for
onion. The details of the growth rate and mean of the area, production and productivity
are indicated in Table 6.

TABLE 6. GROWTH IN AREA, PRODUCTION AND PRODUCTIVITY OF ONION IN SELECTED REGIONS

Mean CAGR R-square Significance

(per cent)
(1) (2) (3) (4) (5) (6)
Karnataka Area (in '000 ha) 104.9 5.1 0.83 0.00*
Production (in '000 mt) 1139.8 8.1 0.78 0.00*
Productivity (in mt/ha) 9.3 2.9 0.38 0.00*
Maharashtra Area (in '000 ha) 175.0 7.0 0.87 0.00*
Production (in '000 mt) 2443.4 7.3 0.84 0.00*
Productivity (in mt/ha) 13.7 0.3 0.03 0.00*
India Area (in '000 ha) 593.8 5.1 0.93 0.00*
Production (in '000 mt) 8306.3 6.8 0.89 0.00*
Productivity (in mt/ha) 12.6 1.5 0.58 0.00*
*Significance level of 99 per cent.
IV

CONCLUSION

The study found that in the long run, in both the markets viz., Lasalgoan and
Bangalore prices showed an increasing trend. The compound growth rate was 1 per
cent in both the markets indicating a very high significance level of 1 per cent. There
was seasonality in the price behaviour. From the regression analysis with got R2 values
of 0.37 and 0.31 for Lasalgoan and Bangalore markets respectively with a very high
significance level of 1 per cent. From this, we can conclude that seasonality is a factor
in the price behaviour of onions but not the sole factor. Seasonality has some influence
on the price of the onion. Through the study plot of the model price, the study did not
find any kind of cyclic variation in the price of onions in the selected market. There
642 INDIAN JOURNAL OF AGRICULTURAL ECONOMICS

was an irregular movement of onion price in the selected market, but the study didn’t
find any periodicity in the irregular spike of onion price in the selected market. As part
of market reforms, minimum support prices for onions and the implementation of
market intelligence systems can help in discovering the right prices for producers as
well as consumers.
The results of the study also indicated significant growth in area, production and
productivity of onion in Maharashtra, Karnataka and India. The growth in the area was
5.1 per cent for Karnataka and India, and 7.0 per cent for Maharashtra. The growth in
production for Karnataka, Maharashtra and India was 8.1 per cent, 7.3 per cent and 6.8
per cent respectively. The growth in productivity for Karnataka, Maharashtra and India
was 2.9 per cent, 0.3 per cent and 1.5 per cent respectively. The study also found that
the growth rate of the area in the selected regions was equal to or higher than the
national growth rate. The growth rate of production was also higher than the national
growth rate in the selected region. But the growth rate in productivity was significantly
low when compared to the growth rate of area and production. The productivity growth
rate of Maharashtra was just 0.3 per cent also lower than the national average.

Received April 2022. Revision accepted November 2022.

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