Dehydration units hit by rising onion prices

High prices of onion and international competition have dented the business of dehydration units in Mahuva, Gujarat.

Mahuva in Bhavnagar, the hub of onion cultivation and trade, is home to 27 dehydration units of the total 49 units across the state. The units in Mahuva turn out about 27,000 tonne of dehydrated onions a year, clocking an annual turnover of Rs 70 crore.

However, in recent times, onion processors here have been bearing the brunt of rising onion prices and competition from China and Egypt amidst concerns over quality and productivity of dehydrated onions.

"The dehydration industry in Mahuva consumes about 98 per cent of the crop harvested in the region, catering to the exports market. But, we cannot afford to procure onions at the current high prices," said Kirit Mehta, president, Mahuva Dehydration Association.

Lower prices of onions last year helped dehydration units to register 50 per cent of the normal total turnover of around Rs 70 crore. This was despite stiff competition from dehydration units in China and Egypt, pointed out Mehta.

"But, this year, we may not even register a 50 per cent turnover, like last year, unless domestic onion prices fall below Rs 100 a quintal and global prices rule in the range of $2,200-2500 a tonne," added Mehta.

Last year, onion prices in the state were in the range of Rs 175-300 a quintal. This year, they have shot up to Rs 750-1,000 a quintal. The international prices are ruling in the range of $1,700-1,800 a tonne.

China and Egypt have been having good harvest in the last few years. Besides, the quality of their crop too is higher than that of India.

The ratio of dehydrated onion output in these countries is 6:1, where 6 kg of onions are required to be crushed to obtain 1 kg of dehydrated onions.

On the other hand, the ratio in India is 10:1, increasing the cost of dehydration four fold, even as more onions are consumed. This has led to a paradigm shift among the global players, who have been turning towards high-quality dehydrated onions of China and Egypt.

"Moreover, imports of dehydrated onions from India attract a duty of 33 per cent in the US and 8 per cent in the UK. The dehydrated onions from China and Egypt are exempt from the duty. This tilts the balance in favour of these countries in global onion exports," pointed out Mehta.

"China and Egypt have a good crop this year. The domestic crop output is low and of a lower quality too, leading to a rise in onion prices. The rising onion prices and increased cost of dehydration, amidst stiff global competition, have rendered the domestic dehydration industry unviable," added Dinesh Kanani, a Rajkot-based international commodities broker.