Govt reverses cut in onion MEP

PUNE: The central government seems to be wary of onion prices. Within hours of issuing a circular late last week slashing the minimum export price (MEP) of onions, the National Agricultural Co-operative Marketing Federation (Nafed) reversed its decision.
A reduction in MEP helps increase onion exports, which eventually results in pushing the prices of this sensitive commodity upwards in domestic markets.

Having reduced the MEP for all destinations by $225 per tonne, the Nafed issued a new notification same evening stating that the MEP for onion in February 2010 shall continue into March 2010, as well. In February 2010, MEP averaged $550 per tonne.

“The decision to reduce MEP for all varieties of onions for different destinations was taken without approval of the competent authority, and therefore, it should be withdrawn,” the circular that reversed the earlier decision stated. The committee, which revises the MEP for the commodity every month, had been recommending reduction for the past few months.

The latest recommendation to reduce the MEP was made because onion prices in the producing markets like Lasalgaon near Nashik had fallen to Rs 700/quintal. Experts felt that decline in onion prices would further add to farmers’ losses. In the past farmers had agitated against low prices.

“These memories could have led to the roll back,” a official noted. The view of the ministry of consumer affairs, that onion prices in the domestic market have not yet come down sufficiently, prevailed in reversing the earlier circular.

The government had hiked the MEP from November 2009 after onion prices sky-rocketed in the domestic market following floods in southern India. The MEP, which was around $200 in April 2009, rose to about $550 in February.

The high MEP led to a huge fall in exports during November and December 2009 and January 2010. The country exported less than 50,000 tonne onions last month against 1.69 lakh tonne exports in February 2009. Considering that onion exports in March 2009 were 2.5 lakh tonne, a reduction in the MEP could have helped increase onion exports considerably in March 2010.