Zero MEP to have less impact on onion prices, exports

The government reduced the Minimum Export Price (MEP) on onions to zero from $400 per tonne

By Sai Nikesh D

In view of sharp decline in onion prices and its adequate supply in domestic market, the government has removed Minimum Export Price (MEP) cap of $400 per tonne to encourage overseas shipments.

Experts are of the view that the move is unlikely to affect onion prices in domestic markets as its demand in export market might remain low.

“Keeping in view of sharp decline in wholesale prices of onion in producing mandies of Maharashtra and major consuming mandies and huge arrivals of onion, the government decided to reduce the MEP to ‘zero’ from $400 per tonne (FOB),” the Ministry of Commerce and Industry said in a statement on Friday.

In the second week of December, government had reduced the MEP on onion by around 43% from $700 per tonne to $400 per tonne following a request from the Maharashtra to boost exports.

“The onion export is depending on the demand of importing buyers. If they have made commitments with other countries, I don’t think more demands will come,” says RP Gupta, Director of NHRDF.

With the prices skyrocketing both at wholesale and retail levels, on lower output due to unseasonal rains earlier, the government had hiked MEP on onions to $700 per MT from $425 MT in August.  As per the Ministry of Agriculture, the move had affected the overseas sale of onions from September onwards.

According to the National Horticultural Research and Development Foundation (NHRDF) data, wholesale onion prices were ruling at  Rs.10-14 per kg at Lasalgaon in Maharashtra, Asia’s biggest wholesale market for onion, much lower than its peak Rs.57 per kg in August. Normally, kharif onion crop arrival starts from October through December.

However, this time, harvesting got delayed due to late sowing. But now, the arrival of fresh crop is in full swing in major growing states – Maharashtra, Gujarat, Madhya Pradesh and Rajasthan.

Experts also believe that the prices will remain stabilised due to continuous supply of kharif yields for a longer period.

“Since the arrival of onion in the producing markets is going to be heavy in the coming days because the kharif onion production will overlap with the late kharif onion produce and as such, the produce of both these crops will arrive in the market. Therefore, there are very less chances of increase in the rate from the present rate in the market,” Gupta said.

India exported 4.59 lakh tonne of onions during May-August this year. Onion production in 2015-16 crop year (July-June) is expected to be lower than 18.73 million tonne in 2014-15 because of poor monsoon.

This was published in The Dollar Business on December 26, 2015  

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