Onion spurts 50% to hit one-month high following export incentives

Price of export-quality bulbs touches Rs 10 per kg; farmers hold back sale of fresh onions, expecting prices to go up further

Onion prices jumped 50 per cent to hit a one-month high following the Centre’s decision to double export incentives and provide relief to farmers who were selling the bulb at a throwaway price.

The model price (average of high and low) of onion touched a four-week high of Rs 9.25 a kg on Monday in the benchmark Lasalgaon mandi, in Nashik district, Maharashtra. Lasalgaon is Asia’s largest onion selling market. What's more, old onions harvested in summer, which were earlier selling for just one rupee a kilo, were also quoted at Rs 5 a kilo.

The price of export-quality onion touched Rs 10 per kg, with exporters returning to market to book their quantity of orders. Some farmers also held back the sale of fresh onions, expecting prices to go up further. This was reflected in lower arrivals, which almost halved to 10,800 quintals today in Lasalgaon.

Over the past several weeks, farmers have been dumping their old stock of rabi onion to create space for new kharif crop. The clearing of old stock coincided with the arrivals of both early kharif (harvested in August-September) and late kharif variety of onion (November-December) in drought hit Maharashtra, Madhya Pradesh and Gujarat. Consequently, the price of rabi onion (harvested in Feb-March) for local consumption slumped to Re 1 a kg in the spot market.

“Farmers and stockists cannot hold old rabi season stocks anymore due to gradual quality deterioration. Also, the new arrivals of kharif and early kharif onion are sold at the buyers’ quoted price due to high moisture content, resulting into short shelf life. Hence, onion prices were falling. But, prices have recovered now on higher demand from exporters, thanks to increase in export incentives,” said Ajit Shah, President, Horticulture Exporters’ Association.

Irked by falling prices, a Nashik-based farmer had sent his earnings of Rs 1,064 for 750 kg of onion, to Prime Minister Narendra Modi early this month.

The Centre on Friday announced doubling of the Merchandised Export of Incentive Scheme (MEIS) to 10 per cent from the existing 5 per cent to bail out farmers from low onion prices. In fact, the MEIS rate was “nil” before July 2018. But, the government levied 5 per cent of MEIS rate in July. The current increase in MEIS rate has brought onion under ‘one of the highest export incentives’ category in agro commodities.

Early this month, the government of Maharashtra had announced Rs 2 per kg of incentive to farmers by allocating Rs 150 crore to provide relief to farmers from falling prices. The incentive was announced for onion sold between November 1 and December 15, 2018.

“The government has decided to encourage exports of onion so that the domestic prices stabilise. The government’s timely intervention would help farmers fetch higher price now,” the Ministry of Agriculture said while announcing increased MEIS rate.

“The MEIS increase would encourage exporters to book large quantity of overseas orders this year,” said Sanjay Sanap, Owner, Shivprashad Traders, an onion wholesaler in Nashik.

Data compiled by the Directorate General of Commercial Intelligence and Statistics (DGCIS) under the Ministry of Commerce, showed total onion exports at 2.14 million tonnes worth Rs 4,384 crore for 2017-18, compared with 3.49 million tonnes valued at Rs 4,652 crore for the previous year.

The Ministry of Agriculture in its third advanced estimate forecast India’s onion output at 22 million tonnes for 2017-18, a marginal decline from 22.43 million tonnes produced in 2016-17.