Govt may withdraw onion MEP

Move to facilitate exports, though experts say flip-flop policy affects India?s credibility

The continuous decline in onion prices has prompted the consumer affairs ministry to mull removing its minimum export price (MEP) for the time being. The idea is to enable exporters get better returns, even as analysts slam the government for its flip-flop policy on restricting outbound shipments of farm produce.

The move also aims to arrest the steady decline in onion prices, which have dropped sharply in recent times. The MEP for onion has already been brought down to $150 a tonne from $475 a tonne since September 9, when the ban on export was lifted. That was done in just 10 days, following strong protests by farmer groups and politicians in Maharashtra, the country’s largest producer.

“We are in favour of a total withdrawal of onion MEP, as prices have declined sharply in the last few months, because of which there is no need for an MEP,” a senior consumer affairs ministry official said.

Onion inflation, which had soared to 40 per cent in August, stood at minus 74.77 per cent during the week ended December 31 because of a bumper kharif harvest and increased area under rabi.

Officials said prices are plummeting across the country as kharif production is better than the last year. Onion prices at this point of time had catapulted food inflation to double digits in 2010.

A report from the Nashik-based National Horticulture Development and Research Foundation (NHRDF) said prices were below last year’s level because of new crop arrival, as harvesting of the kharif crop in Maharashtra, Madhya Pradesh, Gujarat, Rajasthan, Karnataka and Andhra Pradesh is almost over. It is expected to get over in Haryana, Punjab, Bihar and Uttar Pradesh by the end of January.

“Also, the area under the rabi onion crop is expected to be better this year as compared to last year,” the report said.

However, many believe this flip-flop in onion export price policy, just as in many other farm commodities, affects the market. Indian suppliers are then seen to be less credible.

“The government does not react according to the situation. If there is a crisis, they take a step in haste and then are slow to rectify it, long after the crisis has eased,” said Ramesh Chand, director, National Centre for Agricultural Economics and Policy Research.

He said one big reason why Indian farm products command less price in the international markets than competitors is that the country is never seen as a credible and long-lasting exporter of farm produce. Onion is a classic case.

“Other countries like China are regular exporters of farm commodities like onions, but in India, by the time we lifted the ban on export in September, most buyers had contracted their annual purchases and what we got was the residual market and that, too, at low prices,” said Chand.

In India, onion is cultivated four times a year, in the kharif, late kharif, rabi and late rabi seasons.

In 2011, onion production stood at 15.1 million tonnes, up 4.1 per cent from last year. In 2012, initial indications show production will be better than 2011. The crop is mainly cultivated in Maharashtra, Gujarat and Karnataka.