Onion Wholesale Prices Drop 16 pct on Arrivals.

MUMBAI: Onion prices in India dropped nearly 16 percent on Thursday as supplies surged in the new arrivals season and raids by the income tax officials deterred hoarding by traders, two dealers told media.

India last month allowed duty free imports of onion and banned exports to calm the price of the base ingredient for almost all Indian dishes. Onion is a staple and considered a politically sensitive commodity.

Average onion prices at the country's largest wholesale market Lasalgaon, in the western state of Maharashtra, dropped 451 rupees to 2,400 rupees ($53) per 100 kg. Despite the fall, onion prices are still more than double of last year's rate.

"Arrivals have risen in Maharashtra as farmers have started harvesting of late-sown kharif crop," Balwant Holkar, a Lasalgaon based trader said. "In next few days prices are likely to correct further due to rising arrivals."

Maharashtra is the biggest onion producer in the country. A multi-fold rise in onion prices in December pushed up food inflation to one-year peak and prompting criticism from the opposition of the government battling corruption scams.

Onion supply in the country worsened after unseasonal rains during October-November, when farmers start harvesting of the summer-sown onion crop, caused severe damage in the top producing states like Maharashtra, Andhra Pradesh, Karnataka and Gujarat.

Average onion prices at Lasalgaon had jumped to 3,800 rupees per 100 kg on Dec. 20, pushing up retail onion prices in few metros up to 9,000 rupees per 100 kg.

Income tax department officials last week raided many traders in Maharashtra to check any wrongdoing in the trade.

"Recent raids by income tax department are prohibiting traders from hoarding," said a Mumbai based trader, who declined to be named.

"Prices are likely to moderate, but they are unlikely to go to last year's level. Unseasonal rains have already cut the country's crop size," he added.

In 2010/11 the south Asian country is likely to produce less than last year's output of 12.17 million tonnes, said a senior official at National Horticultural Research and Development Foundation.

The world's second biggest producer has exported 1.158 million tonnes of onions in the April-November period, down 16.3 percent on year as the government kept the minimum export price higher than prevailing global prices to augment supplies in the local market.

Source : economictimes.indiatimes.com