Onion export price raised to $700/tonne

The government on Saturday raised the minimum export price (MEP) for onions from $425 a tonne to $700 in yet another move to tame prices that shot up to around $864 at Lasalgaon in Maharashtra.

Local prices do not make exports attractive, but the move is designed to prevent outbound shipments from becoming lucrative if domestic prices fall below $700 a tonne.

A secretary-level meeting with the main procurement agencies will be held on Monday to monitor the situation. Experts, though, said onion prices might remain high on account of crop loss due to untimely rains.

"The government is keeping a close watch on the rise in prices of onions. To increase the availability of onions in the domestic market, it has been decided to raise the MEP further to $700 a tonne," a statement from the food ministry said. The MEP was last raised from $250 a tonne on June 26.

The move came close to MMTC floating a tender for import of 10,000 tonnes of onion, expected to arrive next month. India exports between 6 and 11 million tonnes of onions a year (see chart).

A major part of the rabi onion crop was damaged due to unseasonal rain and hail in February-March. Onion production was 18.9 million tonnes in 2014-15, half a million tonnes less than the previous year.

Planting and replanting of the kharif crop was affected by deficient rain in Maharashtra, Andhra Pradesh and Karnataka, the three states that contribute 50-60 per cent of the kharif onion.

"Wholesale prices touched Rs 57 a kg at Lasalgaon. The MEP of $700 roughly translates to Rs 46 a kg. The government move will ensure that if prices fall to, say, Rs 40 a kg, traders should not find exports lucrative," said Devendra Pant, chief economist of India Ratings.

According to government data, the retail onion price was Rs 66 a kg in the national capital on Friday, Rs 50 in Mumbai, and Rs 52 in Chennai and Kolkata. The effect of today's wholesale prices in Lasalgaon will be reflected in the next few days.

In spite of several government measures, the price of onions has risen unabated in the wholesale and retail markets in the last few weeks due to tight supply. Pant said prices would cool only when the kharif crop arrived in the market by October-November.

The early kharif crop, which contributes nearly a fifth of the annual production, was affected by deficient rain. Sowing of the late kharif crop, another fifth of the total output, was delayed by lack of soil moisture. Hence, even if rains resume in 10 days, harvesting of the kharif onion crop will be delayed by two weeks or more.

A meeting will be held among the secretaries of the food, commerce, and agriculture ministries and representatives of the Small Farmers Agribusiness Consortium (SFAC) and NAFED on Monday. SFAC and NAFED have procured 8,368 tonnes of onions, 2,511 tonnes of which is for the Delhi government.

SFAC is supplying onions at Rs 30.50 per kg to SAFAL, which retails them at Rs Rs 39 a kg in Delhi. SFAC also sells onions to consumers at Rs 35 a kg through 120 milk booths of the Delhi Milk Scheme. The Delhi government has also decided to sell onions at Rs 30 a kg through 280 fair price shops.