Ban on onion exports brings tears to dehydration industry

The blanket ban on onion exports has affected the Rs 500-crore onion dehydration industry in India. Nearly 7,500 tonnes of dehydrated onion is stranded in ports.

The Ministry of Commerce & Industry had issued a notification on December 22, 2010 banning exports of all types of onions, following an alarming rise in prices in the domestic market. Soon after, the Directorate General of Foreign Trade (DGFT) followed suit suspending export of even dehydrated and processed onions. In its notification DGFT said, onions of all varieties – including Bangalore rose onions and Krishnapuram onions fresh or chilled, frozen, provisionally prepared or dried – barring cut, sliced, and broken onions in powder form, have been put under the prohibited category and not permitted to be exported.

An official from National Agricultural Cooperative Marketing Federation of India Ltd (Nafed) told Business Standard that dehydrated onion exporters belonged to the same category that prohibits export of onion. “Many dehydrated onion exporters approached us to get clarity on the export ban. They come under the HS Code 0703 10 10 and 0712 20 00; hence the restriction on exports applies to them as well.”

“It is meaningless to ban dehydrated products of onion as it has no role in the price rise. Hardly 20 per cent of the total onion output is getting converted to dehydrated products. We will take up the issue with the government to remove the ban,” said Kiritbhai Mehta, president, All India Dehydration Association.

Dehydration units fear heavy losses if exports are not allowed. “During March and April, fresh stock of dehydrated products will reach the market, which will bring down the prices of the old stock by 15 to 20 per cent. At present, we have to shell out an additional Re 1 per kg to store our products at the warehouses. This will add to the burden of exporters like us,” said Mehta. High onion prices have forced some of the dehydration units to shut down.

Globally, India holds about 50 per cent market share in the dehydration business. Recently China, one of the biggest competitors of Indian products, increased prices of its dehydrated products from $2,400-3,000 (Rs 1.07 lakh to Rs 1.30 lakh approximately) per tonne to capitalise on India’s ban on dehydrated products.

“The dehydration business is earning foreign exchange for India and the government should recognise this. The export restriction will benefit our competitors like China and Egypt. Moreover, it will also damage our image in the international market as we fail to fulfill our commitments due to the government ban,” said Vitthalbhai Koradiya, managing director of Mahuva-based Maharaja Dehydration Private Limited near Bhavnagar.

“Approximately 7,500 tonnes of dehydrated products are ready in the ports but due to the ban we are not being able to ship it,” he added. India has about 95 active onion dehydration units, of which 70 are located in Gujarat, including Bhavnagar, Mahuva, Vadodara and Gondal. The country has about 30 export oriented units (EOUs) of dehydrated onion products. Major export destinations include Europe, Russia, France and America, where annually around 60,000 tonnes of dehydrated onion products are shipped.