india

Updated: Dec 29, 2018 00:15 IST

The Union Cabinet has cleared a proposal to grant higher export incentives for onions, a move that is aimed at improving the domestic prices of the commodity whose lower-than-profitable rates have hit growers in states such as Maharashtra and Karnataka.

Onion exporters will now qualify for a 10% export incentive, up from 5% earlier, under the so-called ‘Merchandise Exports from India Scheme (MEIS)’, which is administered by the directorate-general of foreign trade. The scheme mainly offers duty benefits to exporting Indian traders, which vary across products and export destinations.

“The export incentives granted for onions under the MEIS from existing 5% to 10% is in the interest of farmers. This will result in better price for onion in domestic markets,” a government statement said on Friday. While this isn’t a direct export subsidy but an export incentive in the form of duty relief, the move will make exports more viable, which in turn is expected to encourage overseas sale of surplus onions from the domestic market, thereby helping improve prices.

“It may be noted that onion arrivals have increased in the market due to which the prices in the mandis are subdued. To contain the situation, it has been decided by the government to encourage exports of onions so that the domestic prices stabilise,” the statement added.

In July 2018, an incentive of 5% was announced for onions. The doubling of the export incentive now means that onions get the highest ever incentive offered for export of any agricultural commodity. One of the reasons for the current spell of low prices in states such as Maharashtra is the arrival of fresh harvests and simultaneous release of old stocks, which farmers were holding in anticipation of higher rates. A larger crop in Pakistan and China, which also export onion, has undercut Indian exports, another reason for depressed domestic prices.

According to the Association of Onion Exporters’ president Ajit Shah, Pakistani onion were going for about $170 a quintal, while Indian exporters need at least $240 to be profitable.

Till October this year, the value of India’s onion exports was $264.12 million.