The government bringing in a massive 40% cut in Minimum Export Price (MEP) on onion has not been a 'welcome move' as exporters believe  that even the reduced MEP is not viable due to poor overseas off-take.

Apart from that, shifting of orders to alternative countries like Pakistan, China, Iran and Egypt has also dampened the exports. The exporters, therefore, will have to wait for a month or so for inquiries to resume.

The government decided to levy an MEP of $500 a tonne on onion to restrict its overseas shipment as the prices in domestic markets were shooting up at Rs 35-40 a kg about six weeks ago.

The move helped onion prices to fall to Rs 15-16 a kg. Convinced with adequate stocks held by farmers, the government cut MEP by 40% to $300 a tonne on August 21.

Exports from China and Pakistan are also being levied at around $300 a tonne. Considering the shipment charge of $40-50 a tonne, onion imports from India would be costlier for overseas importers.

“Even $300 a tonne of MEP is not viable for exporters due to cost effective supply from Pakistan and China. Harvesting of new season crop has started in Pakistan. Interestingly, the quality of new season Pakistani crop is better than stored onion in India. Hence, there is no inquiry coming in to Indian exporters. However, once Pakistani crop gets over, importers will turn towards India,” said Ajit Shah, President, Horticulture Exporters Association.

Both India and China compete with each other for onion supply to Gulf countries. India competes with China in onion exports to Sri Lanka and Far East countries. For South East Asian markets, however, India’s main competitors are Iran and Egypt where local crops have played a spoilsport for India’s potential exports.

China leads in global onion production with 40% market share followed by Pakistan 27% and India 20%. The Food and Agricultural Organisation of the United Nations estimated global onion production at 80 million tonnes in 2012-13. India’s onion output in 2013-14 was estimated at 19.2 million tonnes compared to 16.8 million tonnes in the previous year.

“There is no demand from overseas market,” said R P Gupta, Director of National Horticulture Research and Development Foundation (NHRDF). Total onion exports from India fell to 1.48 million tonnes in 2013-14 as compared to 1.67 million tonnes in the previous year. Following frequent change in policy to discourage exports, India’s shipment may decline further this year.

Trade sources said that the government of Sri Lanka has levied 25% import duty on onion. Since, India was the only source of onion origin for Colombo, the import duty played a spoilsport for exporters.

Additionally, deteriorating quality has been a major drawback for Indian exporters this year. Owing to unseasonal rains and hailstorms in February this year, lots of harvested crop got wet and damaged. Early harvested onion was caught with high moisture which reduced its shelf life resulting into fear of high spoilage. Overseas importers current avoid import from India.

“India has also lost credibility on global front because of frequent change in policy. Overseas importers prefer to source from authentic and sustainable suppliers. Since, Indian government levies, cuts and withdraws MEP as per its own convenience, its credibility has been affected severely on global scale,” said a city based onion exporter.

Importers have booked to full from alternative sources. Unless existing orders exhaust, they will not start new inquiries. Indian exporters, therefore, will have to wait at least for a month for inquiries to resume, he added.
 

Source:- business-standard.com