More Stories

Informist, Friday, Dec. 12, 2025

MUMBAI – Operation of the price stabilisation fund has emerged as India's principal mechanism to moderate volatility in onion prices, and has helped raise farmer income, according to a study conducted by Arcus Policy Research in collaboration with the Department of Consumer Affairs, government of India. Though the fund barely covers 1–2% of the annual domestic output, retail price volatility has declined 24% and the frequency of price spikes has halved ever since the mechanism was operationalised in 2015-16 (Apr-Mar), the study said.

The study, titled 'Documenting Onion Operations under Price Stabilisation Fund', showed consumer disposal prices of onions have remained 36–45% below market levels, directly improving affordability during seasonal peaks. The study analysed the impact of the mechanism in Delhi over five disposal months through December, and covers two financial years – FY24 and FY25. The government sold onions at INR 2,500 per 100 kg, while the retail price averaged about INR 4,557 per 100 kg, a gap of about 45% in the five disposal months of FY24. Similarly, the disposal price was INR 3,500 per 100 kg compared to the average retail price of INR 5,473 per 100 kg, a gap of about 36% in FY25.

The retail price cycle itself has elongated — from annual spikes to a spike once every 24 months, creating longer stretches of price stability for households and food-service operators, the study said.

Data from spot markets also showed smoother spatial price transmission, as prices in Delhi, a key consumption and price-sensitive market, averaged 16% below those in Lasalgaon, Maharashtra, which is India's primary onion production hub. This shows an inversion of the usual price hierarchy, enabled by the timely release of onion buffer stocks, which kept retail inflation contained.

The study also pointed out farmer-level gains achieved through the mechanism. Procurement prices of onion exceeded spot market rates by up to 19%, the farmer's share in the consumer rupee rose to 54% from 45%, and payment cycles were shortened to three days from 7–10 days.

Launched in 2014 under a memorandum of association and transferred to the Department of Consumer Affairs in FY17, price stabilisation fund operations were subsequently aligned with the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan framework in 2024. Procurement volumes under the mechanism have grown steadily from under 10,000 tonnes in FY16 to 640,000 tonnes in FY24, covering about 2% of India's total onion production. This is nearly a 70-fold increase in less than 10 years, the study said. 

The mechanism has undergone major operational reforms since 2020. In 2024, the department turned to rail for long-distance movement of onions. This resulted in halving of the total delivery time, a reduction in onion losses during transportation by 10%, and a fall in freight costs by 17%, the study said. Operational improvements also included storage recovery rising to 85% in FY25 from 68% in FY19, it said.
 

Over the years of its functioning, the study suggests that the price stabilisation fund now operates less as a procurement scheme and more as a credible market signal. By codifying rules, stabilising prices, and reducing risk, the mechanism has triggered production and investment multipliers that extend well beyond its operational footprint.

Among its many recommendations, the study said that the price stabilisation fund should be consolidated as a permanent rules-based stabilisation architecture and embedding continuous monitoring to sustain transparency, predictability, and systemic trust.  End 

Reported by Shreya Shetty

Edited by Avishek Dutta

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.