Onion prices up 25% as govt allows export without MEP

Onion prices rose 25 per cent in the spot market here on Monday due to lower output estimates on deficient monsoon rainfall and the government’s decision, on Friday, to allow its shipment abroad without any minimum export price (MEP).

Data compiled by the National Horticultural Research and Development Foundation showed the model price of onion jumped by Rs 150 a quintal from yesterday, to trade at Rs 750 a quintal. Arrivals in the spot market here have also intensified. Accordingly, on Monday total arrivals in the spot market were 11,200 quintals as compared to 10,466 quintals yesterday.

A Friday notification by the Directorate General of Foreign Trade showed the government had scrapped the MEP barrier to boost exports. Pakistan, the normal competitor has none available at present, with its crop having failed last year. Continuous revision of MEP had restricted India’s opportunity; the government feared rising onion prices might help raise inflation. However, after May 8, the MEP requirement had been removed; the loosening was applicable till July 2, when it was to be reviewed.

“Trade was better, with export demand having got support from the MEP removal,” said Ashok Valunj, director of the Agricultural Produce Market Committee at Vashi.

Traders are optimistic on a further rise in prices due to the deficiency in monsoon rain. According to the India Meteorological Department, there was 31 per cent lower rainfall in June, on the long term average, resulting in a 60 per cent delay in sowing of the early crop in Karnataka.

Union food minister K V Thomas had earlier estimated India’s total onion output at 15.7 million tonnes in the 2011-12 crop year (July-June), against 13 mt in the previous year. However, frequent changes in government policies restricted demand at home and abroad. Due to the high export price, India had lost its competitive edge in international markets to China and Egypt. In January, the government had lowered the MEP on all varieties, except Bangalore Rose onions and Krishnapuram onions, to $150 per tonne.

India ranks second in the world in onion production, with Maharashtra and Gujarat the main producing regions. There was a serious supply crunch in late 2010 and early 2011, when prices rocketed to Rs 80-85 a kg in the retail market. Demand was usually stable through the year in 2011-12.

The vagaries of nature affect the crop badly. Hence, the deficiency of rainfall is likely to hit output this season. India exports onion to Sri Lanka, West Asia and Malaysia, besides a small quantity to some European countries.