Farmers forced to sell onion at loss as govt blocks export

Prices fall 60% in one month on high arrivals; retail buyers get little relief

For the first time in the current season, onion prices slumped below the production cost at the benchmark Lasalgaon mandi on Thursday because of sharp increase in arrivals and weak export demand. A worried central government called a meeting of senior officials from the department of agriculture and consumer affairs, and lowered the minimum export price (MEP) of onion to $400 a tonne, from the current $700 a tonne.

Onion prices hit Rs 7 a kg in wholesale Nashik market as farmers off-loaded their produce amid fear of high spoilage. However, despite the absence of exporters, the premium quality onion was traded at Rs 16 a kg, resulting in an average model price of Rs 11.50 a kg.

It costs between Rs 5.50 and Rs 6 to produce one kg onion, mainly because of expensive seeds and fertiliser. Another Rs 1.50 to Rs 2 a kg is spent on moisture management through sprinkling of dry powder on the produce. "Total cost of onion production works out at Rs 7.50 to Rs 8 a kg. There has been unseasonal rainfall across onion growing regions. Therefore, farmers need to sprinkle powder to prevent high spoilage. Demand is also low due to the absence of exporters. Onion farmers are suffering losses at the current price of Rs 7 a kg. Only premium quality onion offers some profit," said Sanjay Sanap, a Nashik-based onion wholesaler.

Despite the fall in the wholesale market, onion in retail markets was sold between Rs 25 and Rs 30 a kg.

In wholesale Lasalgaon mandi, model onion price slumped by 59 per cent over the last one month. In Mumbai, wholesale price slumped by half to Rs 14 a kg in the last one month. But retailers have not passed it on to the consumers. In Mumbai, retail onion price declined by around 37 per cent only.

"The government should act in the interest of farmers. It seems, they would not reduce MEP steeply to prevent (domestic) onion prices from rising," said R P Gupta, director, National Horticultural Research and Development Foundation (NHRDF).

In August, the government had raised onion MEP to $700 a tonne from $425 a tonne to keep prices under check.

At that time, onion prices were hovering around Rs 44-46 a kg in wholesale and Rs 60 - 70 a kg in retail markets.

Therefore, exporters have lost business to traders in Pakistan who are offering onion to the world market at $300 a tonne. "Who will buy onion at $700 a tonne from India when the same quality product is available from other countries at $300 a tonne and less? The government must reduce MEP to encourage exporters. This will boost prices a little, helping farmers earn more," said Ajit Shah, president, Horticulture Exporters Association.

Onion export from India has declined sharply in the last three years. From 1.8 million tonnes in 2012-13, onion shipment plunged to 1.09 million tonnes due to frequent change in government policies. Until August, onion export was reported at 459,890 tonnes.

Meanwhile, onion arrivals in mandis have shot up. At the benchmark Lasalgaon mandi, total arrivals doubled to 1,600 tonnes on Thursday from 811 tonnes on November 1.