The Ministry of Commerce & Industry has decided "to further reduce the MEP from USD 350 per tonne to USD 150 per tonne," it said in a statement.
The decision was taken after a meeting between the Minister of Agriculture and the Minister for Commerce on December 25 to discuss issues related to the sharp decline in wholesale onion prices in Maharashtra and the need to review the MEP, according to the statement.
The government had imposed the MEP to curb exports and boost domestic supplies after a sudden and sharp hike in onion prices across the country starting in July. Prices continued to rise and had touched about Rs 100 a kg in mid-October following unseasonal rainfall and alleged hoarding by traders.
An inter-ministerial committee on onions will closely monitor arrivals, wholesale and retail prices of onions in the country, according to the statement.
The government will intervene as required to ensure price stability and adequate domestic availability of onions along with price protection with a view to balance the interests of both farmers and local consumers, it said.
The MEP had been raised regularly up to USD 1,150 per tonne in November. Last week, the commerce ministry lowered the onion MEP to USD 350 per tonne from USD 800 per tonne.
Onion exports had come down to 29,000 tonnes in August. In the April-November period, onion exports dropped to 8.53 lakh tonnes from 18.22 lakh tonnes in the same period in 2012-13.
Wholesale prices in Lasalgoan, Asia's largest onion market, have plunged to below Rs 10 a kg from Rs 60 in September, while retail market rates have fallen to Rs 20-25 a kg from Rs 100.
With wholesale prices declining, farmers in producing states such as Maharashtra have been protesting, demanding the removal of export restrictions.
Agriculture Minister Sharad Pawar had asked the Commerce Ministry to encourage exports to help farmers by scrapping the MEP for onions, sources said earlier this week.