Govt may levy minimum export price on onion to discourage shipment

Seven months after its abolition, the government is considering levying the minimum export price (MEP) on onion once again.

In May 2012, the government abolished the MEP on onion, thereby, allowing traders to take advantage of rising prices in the global markets. But, shortage of good quality onion in the recently ended kharif and the ongoing rabi harvesting season flared up its prices by upto 250% in the week between January 5-10, 2013 compared to the same period last year.

Trade sources believe that the government is all set to levy MEP at $700 a tonne to discourage exports from India despite having no real shortage of its availability for domestic consumption. “It’s huge,” said an exporter.

Currently, exporters are executing orders from the Middle East importers at $420 a tonne. At $700, therefore, Indian orders which already been low would be shifted to the countries like Pakistan, said a traders.

India’s total onion exports registered a growth of 15% at 1.55 million tonnes in 2011-12 compared to 1.34 million tonnes in the previous year.

Ashok Walunj, director of Agricultural Produce Marketing Committee (APMC), Vashi, experiences lower overseas order this year being exports uncompetitive from Pakistan. Traders, meanwhile, are holding their inventory to sell on high. Consequently, the wholesale price in Vashi market sustained the high at Rs 19-20 a kg on Thursday, a rise of Rs 3-4 a kg from Monday. During the week, however, arrivals jumped to 250 trucks (1 truck = 9 tonnes) from 200 trucks in the beginning.

Onion exported from Pakistan is cheaper by $30-40 a tonne than India. An MEP levy of $700 would further deteriorate export opportunity, he added.

Meanwhile, R P Gupta, Director of National Horticulture Research and Development Federation (NHRDF) sees India’s onion supply to remain normal this year with an output estimate at 17.4 million tonnes, same as last year. Blaming traders for artificial price rise, Gupta said that around 10% decline in acreage would be compensated with higher recovery.

First advanced estimates, however, forecast India’s onion output between 16.4 and 16.6 million tonnes which is likely to be revised upwards in the second crop assessment next month.