Price hike bring Gujarat onion dehydration units on brink of closure

27 March, 2018


Gujarat onion dehydration units are on the brink of closure due to increase in the international markets and reduced demand on the domestic front due to leftover stock. This is actually badly hampering the production. And addition the ministry of commerce and industry has reduced the transport assistance to three per cent from the earlier seven per cent.

According to All India Dehydration Association (AIDA), currently, out of 100 onion dehydration units in Mahuva, 60 to 70 units have stopped their operations, and the rest are on the verge of shutting down. This is due to the burdened inventories and also the decrease in export demand.

AIDA has raised concerns tothe commerce ministry, requesting them to introduce a minimum export price (MEP) for dehydrated onions and also to remove the export duty levied. But no response has been received even after six months. If no step is taken, the whole onion dehydration industry will obscure.

In India, onion is grown in three crop seasons, namely kharif (harvested in October-November), late kharif (January-February) and rabi (April–May). The rabi season crop is the largest, accounting for about 60 per cent of the annual production, with kharif and late kharif accounting for about 20 per cent each. The major producing states are Maharashtra, Gujarat, Karnataka, Madhya Pradesh, Andhra Pradesh, Bihar, Rajasthan and Haryana, which together account for 85 per cent of the total production.

Since the rabi crop is the main crop, most of the production takes place during this period, and since the demand for onion is steady, there seems to be excess supply and the price falls. When a fresh crop is available in the market, the demand for dehydrated onion is also affected due to economical reasons. It is expected that the demand has reduced to 50 per cent (15,000 metric tonne) over last year, since last year, the export was good and importing countries like Russia, Germany, France and the United States also have sufficient stocks. This has resulted in a low demand for dehydrated onions.

India, the second largest exporter, contributes approximately 40 per cent of the total global export of dehydrated onions. The United States is the leader, exporting approximately 50 per cent and the remainder is exported by Egypt and China. India exports to major countries, such as Russia, Germany, France and the United States, and the total export goes up to 60,000 metric tonne per year. Our main competitors are China and Egypt, but India has quality and price advantages.

India levies 10 per cent export dutyon dehydrated onions, while in the United States, Egypt and China, it is duty-free export. This has increased the price of exports, making it difficult for Indian industries to compete in the international market. To add up to this situation, the transport assistance, which was seven per cent earlier, has been reduced to three per cent by the commerce ministry, thus making it more difficult for these exporters.

The demand for dehydrated vegetables in the domestic market is only about 15-20 per cent, and is mostly used in the making of seasonings, flavouring chips, etc. The household demand is comparatively very less due to the lack of awareness about dehydrated products.

Offering a contradictory view, a trader from Mahuva informed the despite of the stocked-up inventories and reduction in the demand, these units have kept manufacturing. This has now led to the closure of many of these units, because now they don’t have enough money for further production.

Out of 100 units, only 15-16 are running currently in Mahuva. In 2016, the onion production was higher than the usual quantity, which led to the piling up of stocks.

Mahuva is the second largest producer of onions and garlic. Therefore, the business is only stipulated to the dehydration of these two crops.

However, for the last few days, even the mandis are shut, as the farmers don’t have buyers for their produce. Therefore, they are not getting the minimum price for their product. Another concern is that, as these stocks are old, the exporters are not getting the desired price.

Some of these manufacturing units directly export dehydrated products. However, some of them sell their products to merchant exporters, who further export these products to the potential buyers. So now, the situation is that even these merchant exporters have inventories stocked up.

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