High onion MEP leaves traders in tears

Written by Sandip Das | New Delhi | Updated: Mar 8 2011, 07:10am hrs
With a higher minimum export price (MEP) compared with global prices, the countrys exports of onion has virtually come to standstill while domestic retail prices continue to plummet.

An empowered group of ministers on food headed by finance minister Pranab Mukherjee last month decided to lift a ban and allow exports of onions at an MEP of $450 per tonne, but the the current global price is around $350 per tonne.

With prices continuing to decline because of arrival of the late kharif crop, farmers are not being able to recover the cost of production, said CB Holkar, managing director of the National Horticulture Research and Development Foundation.

He said that farmers have already requested the commerce ministry to lower the MEP immediately so that farmers would at least recover their cost of production. Even agriculture minister Sharad Pawar recently asked the government to reduce onion MEP.

Wholesale onion prices dipped to around R400-500 per quintal on Monday at Nashik, the hub of the countrys onion trade. With the arrival of the late kharif crop, retail prices in most cities have declined to around R12-15 a kg, well off the highs of up to R80 a kg recorded in the last week of December.

The government had banned onion exports in end-December when domestic prices rose to R70-80 per kg in many cities due to disruption of supplies because of a lower kharif crop that was partially damaged because of unseasonal heavy rain. The commerce ministry was empowered to take a call on MEP, which earlier was the prerogative of agriculture cooperative major Nafed,

However, prices started to declined from the last week of January after fresh arrivals of onion crop. The improvement in supplies pushed down wholesale onion prices from the R 3,000 a quintal that prevailed a month to around R500 a quintal in recent weeks, after which farmers started protesting against the sharply decking prices.

Last month, the government lifted the export ban on two varieties of onions, Bangalore rose and Krishnapuram, which are mostly grown in Karnataka and Andhra Pradesh. The biggest producer, though, is Maharashtra, which accounts for more than 40% of onion production. According to agriculture ministry estimates, total production of onion in the current year is around 13 million tonne. Prior to the ban, India had exported 1.15 million tonne of onions, mainly to Gulf countries, Sri Lanka and Malaysia between April and November.