Onion Agri Value Chain: The Bijak Perspective

Onion Agri Value Chain Onion Agri Value Chain

Onions are widely used in kitchens across India. In fact, it can be a bit challenging to find Indian recipes that don’t use onions. Apart from culinary purposes, onions also have medicinal value. But have you ever wondered how the humble onion reaches your plate, every day, throughout the year? We spoke to Navdeep Vyas, AVP, Operations at Bijak to get a better understanding of the onion agri value chain in India.

India is the second-largest producer of onions in the world, after China. There is a huge demand for onions within India. Apart from domestic consumption, there is also a huge export demand for this crop. The onion value chain comprises mainly farmers, suppliers, commission agents, wholesalers, retailers, and consumers. Since many big players are registered users of the Bijak app, Navdeep has the pleasure of observing the intricacies of the onion agri value chain.

“It is not as simple as farm to fork. There are many people involved at every step of the process, and there are few distinct stages, each of which adds to the value of the product that reaches your plate.”

Stage 1: Onion Cultivation

“The two seasons for onion production are kharif and rabi. Kharif onions are usually planted between July to August and harvested between October to December, whereas rabi onions are planted between December to January and harvested between March to April. When farmers plant their onions, they factor in the price of various inputs like seeds, fertilizers, pesticides, labour, etc to their final crop,” says Navdeep. Kharif onions usually contain a little bit of moisture content when they are harvested. They have to be dried for a week or two (maximum up to a month) before they can be transported. Rabi onions, on the other hand, are harvested during the summers and don’t have this issue. Therefore they are always in huge demand.

Onion cultivation
Onion cultivation

The top onion-producing states in India are Maharashtra, Madhya Pradesh, and Karnataka. Maharashtra usually tops the list because of consistent high yields, owing to high soil quality. “Even though India is the second-largest producer of onions in the world, the yield per acre is low when compared to US and China”, says Navdeep. Maharashtra’s high yields and superior quality onions are what make it an evergreen winner.

Stage 2: Inventory

After onion cultivation, comes the inventory stage. This involves harvesting the crops and transporting them to storage. This is an expense in itself. However, storage poses an added expenditure for a particular reason.

“Most storage facilities can hold between one to three lakh metric tons of produce and the storage fee begins at ₹7 per kg. However, most of these facilities are not up to the mark when it comes to preventing spoilage. Therefore Indian farmers expect 15% wastage at the storage level. This too gets added to the cost.”

Storage is usually filled by April and the commodity is readied for sale towards the end of April. This is when things move to the third stage. And this is where Bijak steps in.

Onion Storage
Onion Storage

Stage 3: Marketing

“Once storage opens for trade, the onions are sorted into bags and transported to nearby mandis for auction. Each of these processes are labor-intensive. For example, onions are usually sorted and graded by labourers within the farms and make-shift facilities. If machine sorting is used, then they have to be sent to packing and grading centres that have such machinery. Then comes packaging. Onions are packed into 50 kg bags after sorting. Nylon mesh bags and jute bags are often used for packaging. Jute wicks away the moisture and is ideal for transporting onions over longer distances. They also cost more than nylon mesh bags, so once again this becomes a business decision,” says Navdeep.

Packing onions in nylon mesh bags
Packing onions in nylon mesh bags

Transportation

Bijak app enables pan India trade between verified suppliers and buyers (including commission agents and institutional buyers). But apart from this, Bijak also provides a truck booking feature on the app which allows buyers and suppliers to book timely and reliable transportation for their commodities.

Truck Booking from Bijak App
Truck Booking from Bijak App

“Bijak makes sure that the trucks are weighed using a weighing bridge before they are loaded. This shows the weight difference of a truck when it is empty and after it’s loaded. This is done because onions often shrink during transportation. The weighing bridge allows suppliers and buyers to gauge the actual shrinkage that has happened. It also ensures that the commodities are not offloaded anywhere during transit.”

Apart from trucks, Bijak also enables transportation of onions by rail for certain users. Rail transport is cheaper but it does take longer. A train may have X number of bogies set aside for carrying commodities and it may stop at different destinations to fill the quota. Rail transport is recommended when the unloading location is further away. Onions are usually transported to Assam, Nepal, and Bangladesh through rail.

“Once the train reaches the unloading location, the onions are transferred to trucks and transported to the final destination. We’ve seen that most Bijak users who book transportation for onions choose to send trucks directly to the unloading location.”

The cost of transporting via rail is ₹1 per kg, whereas truck transportation usually costs between ₹4 to ₹5 per kg.”

Truck filled with onions and ready to go towards destination
Truck filled with onions and ready to go towards destination

Trade

Even though Maharashtra is the biggest producer of onions, the biggest consumers are the South Indian states of Telengana, Karnataka, and Tamil Nadu. Therefore there is a constant flow of commodities towards the mandis in these states.

After the onions reach the mandi, trade begins in earnest. “Each mandi has a particular onion consumption rate,” says Navdeep. “For example, a truck carries between 25 to 30 tons of onions. Now if we take the case of Malakpet Market of Hyderabad, its consumption is 60 to 80 trucks per day. When the number of trucks arriving are lower than this, the price of onion increases and vice versa. Similarly, each mandi has a minimum bidding rate set by its committee. Onions are usually auctioned off based on these bidding rates. Then let’s factor in the commission percentage charged by commission agents, bilti paid to suppliers, and other expenses like auction set-up, etc. Similarly, once the onions are auctioned off, you can expect the final buyer to add his profit margin to the final produce as well.”

Onion being sold to final user
Onion being sold to final user

This is the onion agri value chain in a nutshell. Every single crucial process adds to the cost of onions so that by the time the farmer’s crop which cost around ₹4-6 per kg reaches you, it may carry a price tag in double digits. Next time you look at an onion sitting innocently in the kitchen, we hope you take a moment to appreciate the long journey it’s taken to reach your plate. We hope you enjoyed this article. Tell us your favourite takeaway in the comment section below. Also, stay tuned for more articles from Bijak experts in the future.

Bijak is well aware of the vast domestic and international onion demand and how its rates keep on fluctuating depending upon seasonal factors, production cycles, export imports, etc. Accordingly, Bijak aims to learn from the agricultural ecosystem to create more trading opportunities for Indian onion traders. Bijak is India’s No. 1 agri-trading app that acts as a meeting point for Farmers, Commission Agents, and Suppliers for 100+ commodities. You may call us at 8588998844 or email us at contact@bijak.in. You could also download our app from Google Playstore and Apple App Store.

Bijak also understands the traditional bookkeeping practices of commission agents and the associated hassles. ChargeERP mandi accounting software has been designed by Bijak keeping this in mind. It is a cloud-based accounting software introduced with the core aim of reducing the agent’s workload. ChargeERP is the easiest, fastest, and most secure mandi accounting software available in India. It can be accessed from the mandi, home, or anywhere else using multiple devices. It provides data security with end-to-end encryption. Plus, it doesn’t require any kind of technical or accounting expertise.