High prices pull down dehydrated onion exports by 70%

Govt's move to increase minimum export price to contain price rise starts showing results

High prices of raw onions have resulted in a fall in shipments of the dehydrated variety from India by 70 per cent during 2015. Dehydration units generally commence production from January and continue till July.

About 14,000 tonnes of dehydrated onion have been exported between January and June, against 48,000 tonnes in the corresponding period last year. The sector expects to export 3,000 tonnes more by December from the inventory.

With the high prices mentioned earlier, demand from international buyers this year has been diverted to China and Egypt. Meanwhile, the Centre increased the minimum export price (MEP) of onion by $175 a tonne to $425 a tonne last week to ensure adequate domestic supply and contain price rise. As a result, prices at the Lasalgaon mandi near Nashik in Maharashtra fell 10 per cent to Rs 13.50 a kg.

“The biggest hurdle we faced this year was the high price of raw onion. It has raised production cost of dehydrated onion, which has made India's dehydrated onion costly in the international market,” said Vitthal Koradiya, president, All India Dehydration Association.

The government has expressed concerns and sought measures to curtail the price rise. The sector has been calling for increased use of dehydrated onions, which can reduce the cost for individual households. When processed, about 10 kg of fresh onions give roughly a kg of dehydrated ones, since the commodity contains around 90 per cent water.

Wholesale prices are between Rs 8 and Rs 14 a kg, unviable for the dehydration sector, which makes profit only when wholesale prices range between Rs 3 and Rs 7 a kg. Wholesale prices have started increasing in view of the marginal fall in domestic production, estimated at 18.92 million tonnes (mt) for the 2014-15 crop year (July-June), against 19.4 mt the previous year, according to government statistics.

Industry sources say unseasonal rainfall destroyed much of the current cycle of crop, mainly in Maharashtra and Gujarat. Major producing states are Maharashtra, Madhya Pradesh, Karnataka, Gujarat and Bihar. A higher export duty puts additional cost in shipping dehydration onions. With a 10 per cent export duty, Indian dehydrated onion price stands at $2,650-2,750 a tonne. China and Egypt offer at $2,300-2,500 a tonne.

Asgar Chattariya, secretary, All India Dehydration Association, said: “Reduced exports have resulted in most of the units running part-time. After May, only a few units have been active.”

Sixty-five of the 80 dehydration units in India are located in Mahuva area of Gujarat's Bhavnagar district. The production capacity of the country's dehydration sector is about 60,000 tonnes a year.

This year, output has been only 25,000 tonnes. Nearly 14,000 tonnes of this year's production has been exported, while the remaining stock is still with dehydration units.

Domestic consumption of dehydrated onion is negligible with just about 5,000 tonnes a year. Only metro cities such as Delhi, Mumbai, Bengaluru, Chennai and Kolkata consume dehydrated onion.