Onion prices fall on narrowing rain deficit

Written by Sandip Das | New Delhi | Updated: Aug 12 2014, 07:28am hrs
Normal monsoon rains in key growing regions Madhya Pradesh, Rajasthan, parts of Maharashtra and Karnataka in the last few weeks, coupled with curbs on exports, have resulted in onion prices moderating in major cities across the country.

According to a food ministry official, retail onion prices have declined to R25-30 per kg across key cities from R30-35 per kg prevailed a month ago.

The delay in arrival of rains in the growing reason led to spike in onion prices across India in June. Retail prices of the commodity even rose to R40 per kg in a few cities in anticipation of delay in kharif crop arrivals last month.

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The government had asked the National Agricultural Cooperative Marketing Federation of India (Nafed) to import 70,000 tonne of onion from Pakistan, Egypt and China to improve domestic supplies.

The prospects of better kharif crops and restrictions on exports have led to improvement in supplies of summer crops being held with farmers, CB Holkar, board member, Nafed, and a farm leader from Nasik, told FE.

He said summer crops usually stored with farmers met domestic demand during June-September, after which kharif crops starts entering the market.

At present most of the key onion growing regions have received normal rains, thus giving a boost to kharif planting. Kharif crop is expected to arrive in the market by the end of September, thus there is no expectation of a spike in onion prices, a food ministry official said.

Last month, the government had hiked the minimum export price (MEP) of onion to $500 per tonne, which made shipments uneconomical as other key producers such as Pakistan and China have been exporting the agricultural commodity at around $ 400 per tonne.

According to official data, only 10,000 tonne had been exported during June-July 2014. The country exported 1.3 million tonne of onion during 2013-14 out of the total output of 19.2 million tonne The food ministry official said the period between July and September is a sensitive time, during which onion prices rise as demand is met through stored crops from the summer output.

The government had abolished MEP of onion in March, when wholesale prices dropped to as low as R6-7 a kg in Maharashtra, the biggest producer of the commodity.

In December 2013, the commerce ministry had reduced the MEP from $350 a tonne to $150 a tonne to boost exports and check the sharp fall in domestic prices. The MEP was imposed last September when retail prices rose to R80 per kg in many cities.