Onion Exports Face Woes In Wooing Back Importers, Higher Domestic Price

Onion shipments from India are facing problems after the Union government lifted the ban on exports from 1 January this year, first in wooing back importers and now due to rising domestic prices.

The Union government banned onion exports in September last year after the vegetable’s retail prices began to surge. In the second week of October, the rates topped Rs 100 a kg in retail outlets.

Besides banning exports, the Centre took a slew of initiatives such as allowing duty-free imports and bringing in stock limits for the trade.

All these helped control zooming onion prices, which began to ease from early December 2020.

As prices dipped to below Rs 20 a kg in Maharashtra’s Nashik district — the hub of India’s onion trade, growers demanded that onion exports be permitted.

This resulted in the Centre allowing exports from 1 January even as it allowed imports till January-end.

Lukewarm demand for exports

When exports were allowed, exporters were faced with the problem of importing nations such as Sri Lanka and the Philippines having ample stocks of onion from other countries.

“Importers of Indian onions had surplus supply from destinations such as Turkey, Egypt and Holland when our exports were permitted. The competitors took advantage of India’s absence since September,” said Chennai-based Rajathi Group Director Madan Prakash.

For example, Sri Lanka, which depends on India to meet its onion demand, had 700 containers of onions waiting to be berthed at the Colombo port. A similar situation prevailed in the Philippines, too.

At that time, Indian authorities were hopeful that in the long run exporters would be able to work out new deals for shipments abroad. Their hope was exports could normalise around March-April.

But onion exports till now have been in fits and starts rather than witnessing any major movement.

According to the Kolkata-based Directorate-General of Commercial Intelligence and Statistics, India exported 13.17 lakh tonnes of onion between April and October this fiscal before the ban was imposed.

Though the ban was imposed on 14 September, the Centre allowed shipments of onions for which contracts had been signed, resulting in about 2,000 tonnes being shipped in October.

Compared with that, exports during the whole of last fiscal year were 11.50 lakh tonnes.

Now, prices surge on unseasonal rains

Even as exporters were trying to find their way back in the global market, onion prices have begun to climb back.

Since the beginning of this month, prices have increased on lower arrivals due to rains in growing areas in January.

According to the Ministry of Agriculture, the modal price or the rates at which most trades take place at Lasalgaon agricultural produce marketing committee (APMC) mandi increased to Rs 3,470 a quintal on 9 February against Rs 2,700 on 30 January.

Actually, prices had hit Rs 3,500 on 2 February before swinging sideways and witnessing a firm trend since the beginning of this week.

Yesterday (9 February), onion was quoted at Rs 53 a kg in Delhi compared with Rs 39 on 30 January. Similarly, retail prices in Mumbai were Rs 55 a kg against Rs 43 during the review period, according to the Ministry of Consumer Affairs, which tracks the retail prices daily across the country.

“Arrival of the Maharashtra crop has been delayed in view of rains in the growing areas in January. The inflow could increase after next week,” said Rajathi Group’s Prakash, whose firm exports agricultural products such as onion, chilli and maize.

In the first week of January, parts of Maharashtra experienced unusual rainfall with Nashik district receiving over 8 mm of rainfall. Other growing areas, too, received a good amount of rainfall.

According to Nashik-based National Horticultural and Research Foundation (NHRDF) Acting Director Dr PK Gupta, the standing late kharif onion crop in Maharashtra was affected by the January rains.

The current domestic prices has resulted in packed cargo of onion being made available at Mumbai at Rs 40-41 a kg against Rs 28-29 in the first week of January, according to Prakash.

Nashik trader Sushant Musale said that the rise in onion prices was sudden, particularly when Indian exporters were catching up with other competitors in the global market.

“The current rise has widened the margin again with other competitors,” he said.

This has made exports a little unviable or placed them in the danger of being outpriced in the global market.

Currently, Indian onions are being offered at around $600 (Rs 43,700) in the global market. Compared to this, China and Pakistan are quoting at $400-425 (Rs 29,125-31,000).

Prakash said that this leaves Indian onion shipments at a disadvantage in the global market for now.

According to Musale, though export demand has not been to expected levels, the sparse enquiries had also led to the price spike.

“Currently, the demand for onion export is below expected levels,” said Sohanlal Bhandari, Nashik District Onion Traders Chairman.

This, in fact, resulted in prices paring their gains to some extent last week before climbing up again.

Hope hinges on price dip in Feb-end

Despite the current trend, exporters and traders are hopeful that onion prices could tend to drop once the late Kharif harvest picks up momentum later this month.

Musalae said harvest of the late Kharif onion would pick pace in a week’s time and thus prices could come under pressure.

The drop in arrivals can be gauged from the fact that the total inflow of onions during 1-2 February was 16,722 tonnes in Nashik district. In comparison, arrivals during 8-9 February were 10,760 tonnes.

On a day-to-day basis, arrivals in Nashik district were 4,632 tonnes on 9 February compared with 7,863 tonnes on 5 February, when prices headed south.

Musale said arrivals are a little lower at Nashik district APMC mandis. For example, in Nashik APMC mandi, at least 500 tractor loads of onions arrive every day during this period but currently, arrivals are lower than 475.

Bhandari finds the arrivals satisfactory and is confident that the new crop will begin arriving early March.

However, NHRDF’s Gupta feels arrivals might not match expectations despite a higher coverage of the late Kharif onion crop.

Productivity will likely be lower, thus negating the higher acreage.

“Quality seeds were not available for the sowing of late Kharif onion. Productivity may be affected,” he said.

Onion seed availability has been an issue since the 2019 Rabi crop, while the quality has also been suspect.

This was because growers had opted to sell their produce than save some for re-sowing. Despite seed availability, onion production in the 2019-20 season (July 2019-June 2020) has been estimated higher.

The Ministry of Agriculture and Farmers’ Welfare has, in its third advance estimate of horticultural crops, pegged onion production at 26.48 million tonnes for 2019-20 compared with 22.82 million tonnes in 2018-19.

No details are yet available on production for this season, though coverage is seen higher in view of the surge in prices.