Commerce ministry official told FE that the government is keeping a close watch on the price movement of the key agricultural commodity and supply situation is likely to improve shortly.
MEP on onion was removed in June last year following a sharp drop in domestic prices.
A deficient kharif output this year in Maharashtra, the biggest producer of onion, has pushed up onion prices in Nasik, the hub of the trade, sharply during last two weeks.
A trader from Nasik said wholesale price of onion has increased to R1,900 per quintal in comparison to R1,200 per quintal prevailed a two weeks back. At the retail market in Delhi, the price of onion rose to R35-40 a kg from R25 a kg a week back.
Last week, officials from the department of consumer affairs, commerce and agriculture held a meeting with the union cabinet secretary to deliberate on spike in onion prices. Sources said agriculture minister Sharad Pawar has opposed re-imposition of MEP on onion.
In 2011-12 (July-June) the onion production was estimated at 15.13 million tonne. The output this year is expected to decline by around 20% because of poor rainfall in Maharashtra which is responsible for over 40% of the total onion production in the country. The country had been exporting about one lakh tonne of onion monthly since June.
Meanwhile, Nasik-based National Horticultural Research and Development Foundation has attributed rise in onion prices to around 20-25% drop in kharif production and the supply situation is expected to rise by the end of this month with arrival of onion from Gujarat and Madhya Pradesh.
The supply situations are likely to improve shortly as late Kharif crop starts arriving in the mandis by end of this month, CB Holkar, board member, National Agricultural Cooperative Marketing Federation of India and a farm leader from Nasik, said.
A centre government official said the government wants to avoid re-occurrence of a huge jump in onion prices in December 2010, which forced it to import onions from Pakistan for bringing down the domestic retail prices.
Delhi chief minister Sheila Dixit has directed officers to take tough action on on hoarders and also wrote a letter to Pawar seeking his urgent intervention to curb the price spiral and take steps to curtail onion export.