Onion tears. Fearing export ban, traditional onion buyers abroad switch to other origins

With traditional buyers of Indian onions hesitating to place orders in view of the Centre banning exports in September last year and in December 2019, onion prices have dropped about 10 per cent since the beginning of July.

“Our buyers abroad are not placing orders for onions, pointing to the ban Centre imposed around September last year and the year before. They have already switched over to other origins,” said Ajit Shah, President, Horticulture Produce Exporters Association (HPEA).

Buyers are not considering even placing orders in the short-term, he said.

Pakistan’s advantage

The other reason why Indian onion is meeting with lukewarm demand in the global market is that the Pakistan commodity is competitive.

“Pakistan is offering onion at rates lower than India. This has slowed down our exports,” Sohanlal Bhandari, Chairman, Nashik District Onion Traders Association.

Shah said Indian onion is quoted, depending on quality, at $320-50 (₹23,800-26,050) a tonne free-on-board compared with Pakistan’s $320 (₹23,800) a tonne, cost and freight. “Pakistan onion is lower by $75 (₹5,600) a tonne and it is available for more than 250 days in a year now,” he said.

Pakistan also enjoys the advantage of a weak currency against the US dollar. This makes onion from the neighbouring country cheaper in dollar terms.

Payment problems

“Onion exports have slowed down to countries such as Sri Lanka and Malaysia due to payment problems and Covid pandemic,” said M Madan Prakash, President, Agri Commodities Exporters Association (ACEA).

Though 125 containers of the bulb recently went from India to Colombo, buyers faced problems in paying since Sri Lanka is facing foreign exchange crisis, Prakash said, adding that Malaysia has cut its purchases due to Covid restrictions in that nation.

The ACEA President said that onion prices could come under pressure next month since the new onion crop will arrive in the markets from Karnataka. “Arrivals of the new crop will begin in 2-3 weeks,” he said.

Repeat situation unlikely

“This year, we may not face the situation we experience in 2019 and 2020. We have had good rains in growing regions of Maharashtra and the early Kharif onion arrivals could begin in September. By October, arrivals could be in full swing,” said Suvarna Jagtap, Chairperson, Lasalgaon Agricultural Produce Marketing Committee (APMC).

Prices have also been ruling stable this year in the domestic market with the market moving either way by ₹200 or ₹300 a quintal, she said.

Currently, super quality onion in Lasalgaon APMC, Asia’s largest for the commodity, is about ₹2,000 a quintal against ₹2,200 at the start of the month. The modal price (the rate at which most trades took place) of fair average quality (FAQ) onion at the APMC on Wednesday was ₹1,590 a quintal compared with 1,720 on July 2.

Rivals hike crop acreage

During the same time last year, prices of FAQ onion at Lasalgaon ruled below ₹750. In retail markets on Wednesday, onion, which topped ₹100 a kg in October last year, ruled at ₹35 in New Delhi and ₹28 in Mumbai, according to the Ministry of Consumer Affairs.

“India’s frequent onion export ban has resulted in competing nations such as Pakistan, Iraq and Turkey to increase the area under the crop. The Centre’s ad hoc policy of suddenly banning exports is hampering shipments,” said HCEA’s Shah.

Suvarna Jagtap said that onion prices are not witnessing any spike despite arrivals dropping by half. “At Lasalgaon APMC, arrivals are currently 2,000-2,500 tonnes against 4,000-5,000 tonnes early this month,” she said.

The easing of Covid shutdown restrictions and opening of hotels and restaurants could see a rise in demand for onion, the Lasalgaon APMC Chairperson said.

Last year, exports had topped 2019 levels by September before the Centre banned the shipments after retail prices topped ₹100 a kg. The Union Government also allowed duty-free imports and imposed a cap on stock holdings, apart from the ban, to control the prices.

Prices rose after the crop was affected by unseasonal rains in August and then in October last year. But the high prices encouraged growers to plant more onion seedlings.

According to the Ministry of Agriculture, onion production was a record 26.92 million tonnes (mt) last season (July 2020-June 2021) compared with 26.09 mt the previous season with the area under the crop rising to 1.6 million hectares (mh) from 1.43 mh.