Govt removes export incentives for onion to discourage outbound shipments

The government has removed incentives for export of fresh and chilled onions, a move aimed at discouraging outbound shipments of the kitchen staple due to rising prices in the domestic market.

Exporters of onion were earlier availing incentives under Merchandise Exports from India Scheme (MEIS) at the rate of 10 per cent.

The Directorate General of Foreign Trade (DGFT), an arm of the commerce ministry, in a public notice dated June 9, stated it is withdrawing the benefits for exports of fresh and chilled onions.

"The rate at which MEIS benefits for exports of fresh and chilled onions is granted under the foreign trade policy has been made zero from the current 10 per cent with immediate effect," it said.

In December last year, the government had doubled the rate of incentives from 5 per cent to 10 per cent under this scheme to boost shipments and ensure better returns for farmers. The incentive was to be there till June 30 this year.

Under MEIS, the government provides duty benefits depending on product and country.

Rewards under the scheme are payable as percentage of realised free-on-board value and MEIS duty credit scrip can be transferred or used for payment of a number of duties, including the basic customs duty. The decision of withdrawal of the incentives assumes significance as the Centre has started creating a buffer stock of 50,000 tonne of onion to check prices in the coming months in view of drought conditions in producing states.

Wholesale prices at Lasalgaon in Maharashtra, Asia's largest wholesale market for onion, have shot up by about 48 per cent to Rs 13.30 per kg Tuesday when compared to Rs 9 per kg on the same day last month, as per official data.

In the national capital, retail onion prices are ruling at Rs 20-25 per kg depending on the varieties. Key onion growing states such as Maharashtra, Karnataka and Andhra Pradesh are reeling under drought conditions this year.

According to the first estimate, onion production in the current 2018-19 crop year ending June is estimated to be slightly higher at 23.62 million tonne as against 23.26 million tonne in 2017-18. The government is expected to revise the estimate later factoring drought impact on production.

Harvesting of rabi crop, which accounts for 60 per cent of India's onion production, is almost complete. India has three seasons for onion - kharif (summer), late kharif and rabi (winter). India's exports of fresh and chilled onions declined to USD 496.76 million in 2018-19 as against USD 511.52 million in 2016-17.