The government on Thursday reduced the minimum export price (MEP) of onion to $350 per tonne from $800 per
tonne in a bid to arrest the sharp drop in domestic prices in the last two weeks.
This is the second time that the government has reduced onion MEP within a fortnight as an inter-ministerial committee (IMC) had reduced the base shipment price to $800 per tonne last week from $1,100.
“The arrivals (of onion) have shown a marked improvement and due to expectations of better crop prospects and the sharp decline in wholesale model prices in production mandis of Maharashtra and other places, it has now been decided by the government to slash the MEP to $350 per tonne with immediate effect,” a commerce ministry statement said.
A trader from Nashik, the hub of the country's onion trade, told FE that wholesale price of onion prices have fallen to as low as R1,000 per quintal from R3,000 per quintal a month back.
"This reduction in MEP would help exports, which have come to a grinding halt since the base export price was fixed far above global prices for improving domestic supplies,” a trader said. Farmers had been demanding a reduction in MEP since the prices of onion had dropped sharply in the last few weeks.
“Heavy arrivals of kharif and late kharif crops from the key producing states of Maharashtra, Rajasthan, Gujarat, Andhra Pradesh and Madhya Pradesh are expected to pull down prices further in the next two months. The MEP of onion has been aligned with global prices now,”CB Holkar, board member, Nafed, and a farm leader from Nasik, said.
Last month, the government had hiked the MEP of onion to $1,150 per tonne from $900 per tonne, which is considered a symbolic move to curb shipments of the critical agricultural commodity for improving supplies. The domestic retail prices of onion rose to as high as R80 a kg two months back. However, due to improvement in supplies, domestic prices have fallen to R20-25 a kg in major cities.
Since September 19, when the government raised the MEP to $900 per tonne from $650 per tonne fixed on August 14, shipments of onion have dropped sharply. According to cooperative major Nafed, onion exports have dropped from 1.65 lakh tonne in April to only 19,218 tonne in September, 2013.
The total value of onion exports in April-September 2013 was more than R1,450 crore (7.16 lakh tonne