In June, the MEP was cut by $25 a tonne to boost onion exports. However, the decision to raise the MEP was taken in the background of retail prices rising from Rs 6 to Rs 10 a kg in June. It could be raised further around mid-July if retail prices continue to move up. The wholesale price index (WPI)-based inflation for the week ended June 14 had touched a 13-year high of 11.42 per cent.
"Retail and wholesale onion prices in the domestic market have been rising over the last couple of weeks. If rates continue to rise after the MEP hike, we will review prices in mid-July," said an official with the National Agricultural Cooperative Marketing Federation (Nafed), the agency that revises MEP on a monthly basis.
Wholesale prices in the Delhi mandi have jumped to Rs 400-600 a quintal from Rs 250-400 quintal a month ago.
Onion exports during April-June jumped around 24 per cent to 310,000 tonnes. An over 7.5 per cent depreciation in the rupee since April is also helping exports.
However, exports in 2007-08 stood at 996,057 tonnes, down 14 per cent from 1,161,062 tonnes in the previous year. Regulatory moves to control domestic prices led to this decline.
"At current prices, farmers would be able to sustain onion cultivation. The price that they were getting in the last couple of months was not even sufficient to cover the cost of cultivation," said Rajinder Sharma, general secretary of the Potato and Onion Merchants' Association, Delhi.
According to the National Horticultural Research and Development Foundation (NHRDF), onion output for 2007-08 is estimated at 7.45 million tonnes, up nearly 12 per cent from last year's 6.66 million tonnes. Farmers got better prices for onion last year.
Consequently, the area under onion cultivation has gone up by 10 per cent to 527,000 hectares.
