Food ministry against further cut

Says no to more sugar exports also as the move will spur domestic prices.

The Union ministry of food and consumer affairs is against reducing the minimum export price (MEP) for onions and allowing more export of sugar, at this point of time.

In a communication to related ministries before a proposed meeting of a group of ministers on these subjects, the ministry has said a reduction in MEP will mean a rise in the prices of onions in the domestic market, stated official sources.

“Currently, the domestic market has limited supply till fresh stock arrives towards the end of November. Once the MEP is lowered, the onion producer will have greater incentive to export than to supply in the domestic market, which will immediately push up prices here due to the limited supply till end-November,” the sources said. “While it is true that onion prices are ruling soft in the international market and buyers are preferring cheaper onions from other countries like China and Pakistan, compared to India, the MEP should not be lowered to support exporters at the cost of pushing up prices in the domestic market.” They said this would also hold true for sugar. “No decision for further export of sugar should take place till new arrivals come in the domestic market. One has to gauge the correct availability of production, demand and supply of a particular crop before deciding on export or import.”

In September, the government had lifted the ban on export of onion, but imposed a MEP of $475 a tonne.

Of the total annual production, 10-15 per cent is during the normal kharif season and another 30-40 per cent in late kharif. The rest comes from the rabi season. A little over 15 per cent of the total output happens in Maharashtra. Other major producers are Gujarat, Orissa, Karnataka, Uttar Pradesh, Andhra Pradesh, Tamil Nadu, Bihar, Punjab and Rajasthan. are the other major producers. Onion production in India this year (2011-12) is estimated at 15.14 million tonnes (mt), as compared to 14.6 mt last year.

The leading growing countries are China, India, America, Japan, Spain, Turkey, Brazil, Italy, Egypt and Pakistan. There is presently substantial demand for produce from neighbouring Bangladesh, China and Pakistan, due to their lower prices. The present MEP is reducing the competitiveness of Indian onion globally, said sources.

On sugar, the government had allowed 1.5 mt of exports under Open General Licence in three equal tranches, during April, June and August. According to industry data, the country exported 217,000 tonnes in the entire 2009-10 season. Production is estimated at 24.2 million tonnes in the 2010-11 season ended this September, as against 18.8 mt in the previous year. The annual domestic demand is pegged at 21-21.5 mt.