Supply shortage sends onion prices soaring to 4-yr high

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SME Times News Bureau | 21 Sep, 2019
The spiralling onion prices due to supply shortage are proving difficult for the government to control.

Onion was quoted 25 per cent higher on Friday at Delhi's Azadpur Mandi, a major market of the Agriculture Produce Marketing Committee (APMC). Several other markets in the country too witnessed a steep rise in onion prices on Friday amid reports of crop damage and delay in arrivals of new crop from Maharashtra, Karnataka and other southern states due to heavy rains recently.

In a bid to restrict onion export, the government has set its minimum export price (MEP) at $850 FOB (free on board) per tonne.

According to a Directorate General of Foreign Trade (DGFT) notification dated 13 September, all varieties of onions, as described in the notification, will be permitted a letter of credit subject to a Minimum Export Price (MEP) of $850 FOB per metric tonne till further orders.

"A higher MEP means export would be impossible," said an onion exporter in Nasik, one of India's major onion producing areas.

The government had withdrawn export incentives on onion under the Merchandise Export from India Scheme (MEIS) in June after bulb prices rose sharply in the country.

Onion was then selling around Rs 20-25 per kg in Delhi and Rs 15 per kg at Lasalgaon in Maharashtra, Asia's biggest wholesale onion market. The prices have risen sharply since,

almost tearing up the consumers. Though government agencies are selling the vegetable in the open market in order to keep its prices in check, the efforts are proving ineffective.

According to the APMC data, onion shot up from Rs 20-40 per kg on Thursday to Rs 22.50-50 per kg on Friday -- a difference of Rs 10 or 25 per cent. It was retailing in Delhi and the NCR between Rs 50 and Rs 75 per kg.

As per the APMC data, onion arrival at Azadpur Mandi was 1,026 tonnes. "Its total consumption in Delhi is nearly 3,000 tonnes and it is resulting in an acute shortage of supply, which is only likely to continue due to delayed arrivals," said Rajendra Sharma, President, Onion Merchant Association - Azadpur Mandi.

Poor supply has also pushed wholesale onion prices to a four-year high. At Lasalgaon Mandi, onion sold for Rs 1,500-5,100 per 100 kg on Friday, as per the APMC rates published on the Maharashtra State Agriculture Marketing Board website. According to trade sources, this was a plateau reached after a significant rise of nearly 40 per cent a day ago.

However, onion production in the 2018-19 crop season was higher as compared to the previous season. Its production is pegged at 234.85 lakh tonnes against 232.82 lakh tonnes estimated a year ago, as per the third advance estimates of India's horticulture output for 2018-19.