The recent steep hike in the prices of onions in the country, which reached the mark of Rs 50 per kg in some places, has caused a major setback for the Rs 1,000 crore dehydrated onions industry in the form of export curbs.
Though the product can be a cheaper alternative to fresh onions, dehdyrated onion industry, has almost no trade in the domestic market due to lack of awareness on its availability among both food processors as well as domestic consumers. Further, it is reeling under the impact of an export ban following the price rise.
Speaking to FnB News on behalf of All India Dehydrated Vegetables Association, over telephone from Mahuva in Gujarat, where most onion dehydration units in the country are located, Savji Thanth, CEO, Maharaja Dehydration Pvt. Ltd, explains, “1 kg of dehydrated onion is equivalent to 6 kg of fresh onion, so at Rs 50 per kg, 6 kg of fresh onion will cost Rs 300 while 1 kg of dehydrated variety is available at just Rs 130 to 150.” Hence, it can be a cheaper alternative to fresh onions.
However, most of the dehydrated onion - all red, pink and white varieties - produced in the country is exported. That is out of the 50,000 tonne of dehydrated onion produced almost 40,000 tonne is exported while the remaining quantity, which is very small goes to the domestic market. According to Thanth, the key reason for this imbalance is lack of awareness about availability of dehydrated onion among all - FBOs, food processors and domestic consumers.
Thanth states, “Except companies like MTR and ITC which use dehydrated onion in their ready-to-eat and ready-to-cook products such as uttappa and upma, there are hardly any people using the product.”
Apart from lack of awareness in the domestic market, the industry is also suffering because of recent actions of the government such as ban on export of dehydrated onion and stoppage of 3% duty drawback under Merchandise Exports from India Scheme. The implementation of Biodiversity Act and bilateral import duty issue with EU destinations are among the other impediments.
Thanth gives details, “The ban on export of our products is uncalled for as we have nothing to do with the recent price rise of fresh onions. As most of our production happens between January and April, when the commodity is cheapest in the market.” He adds, “We use almost 5 lakh tonne of onion during this period, buying it from farmers, which otherwise will go waste.”
He points out that fresh onions come under perishables and need cold storage or ventilated storage unlike dehydrated onion, which can be stored at room temperature. Also fresh produce always results in at least 30% spoilage, unlike dehydrated products. Looking at all these factors it is clear that dehydrated onion industry is in no way connected with the price rise of fresh onions.
Further, according to Thanth, dehydrated onion as well as vegetable industry offers a good solution to the issue of wastage of almost 40 to 50% of perishables such as vegetables and fruits in the country. The reason why it needs schemes like MEIS, which “For an industry that works on 3-5% margin seems like an incentive, motivation and cause for being competitive.”
Not only that, banning exports abruptly results in long-term repercussions on an industry already facing tough competition from countries like China, Egypt and USA. Thanth explains, “For instance, if an Indian company has been supplying to a company in Germany but due to a ban is forced to stop supply for say 2-3 months. The German company will blacklist the Indian company and it is difficult to regain the lost position in view of the competition.”
As remedial measure the industry wants the government to not link the trade in dehydrated onion with fresh onion in the future as well as restore the duty drawback scheme. Also the association wants joint efforts by the industry and the government to create awareness on the advantages of using dehydrated onion in place of fresh onion round the year, which will ensure that the market is not affected when onion prices experience a steep rise.
In this regard, the association has been making representations to top officials from Union ministries of food processing and commerce and APEDA (Agricultural and Processed Food Products Export Development Authority) and awaiting a solution.
Dehydrated Onion Industry in India
1. Indian Onion Dehydration Industry is ranked at No. 2 in world with production of 42,000 to 60,000 tonne average (2012-2014)
2. Dehydrated onion export from India is approx. 30,000 to 52,000 tonne - 66% of exporting to EU destinations
3.Almost 86% of India’s exports come from Gujarat - 58% exported through Mundra followed by 28% through Pipavav port.
4. There are 80 dehydration units in and around Mahuva, and there are 6 to 7 dehydration units around Rajkot (Gondal) / Jamnagar
5. Major production: Dehydrated White onion, followed by Red and Pink onion
6. Garlic is second-largest product after onion for dehydration
7. Due to high concentration of units in and around Mahuva – this has
became a potential cluster in the food processing section of India
8. The cluster fetches foreign exchange to the tune of Rs 547 crore (US$ 88 m) (Total Indian dehydrated veg export: Rs 874 cr. (US$138.77 m) Ref: DGCIS year 2014-15
9. Limited traceability, high pricing volatility and weather risk
10. Small-/ medium-sized farming with many different varities of
onion grown, industrial grade raw material is not available
11. Some risk of govt led market intervention in fresh onion
segment as well as export regulations and incentive removal
