By NewsGram Staff Writer

After a satisfactory start to the monsoon, lower overseas demand due to Ramadan and rumours about imports from Pakistan, onion prices declined last week.

Prices fell even before the government increased the minimum export price to $425 (Rs 26,968) a tonne on Friday to discourage exports.

The increase in the minimum export price (MEP) makes onions almost on par with rates overseas.

Average monthly wholesale onion prices at Lasalgaon agriculture produce market committee (APMC) in Nashik district had increased to Rs 16/kg in June from Rs 12/kg in May.

However, wholesale onion prices dropped by Rs 2/kg over the past 10 days mainly due to a decline in exports due to Ramadan and the timely arrival of rains.

The major kharif onion growing states of Maharashtra, Karnataka, Gujarat and Rajasthan have received good rainfall.

"For the first time, the ministry has taken into consideration the prevailing export price for fixing MEP. Considering the export price of about Rs 20/kg and other costs like transport, the hike in MEP is reasonable," a government official told ET.

The past year's good prices may encourage onion farmers to stay with the crop. Farmers received an average of Rs 13/kg during the past one year. Timely sowing will also mean that the kharif crop will come to the markets on time and stored stocks will start dwindling.

The condition of the early sown crop in small pockets of Karnataka and Andhra Pradesh is reported to be good.

"Onion situation looks to be under control now as compared to what we were expecting two months ago," said Ajit Shah, chairman of the Onion Exporters' Association.

Another reason for the decline in prices at Lasalgaon was a rumour that spread on the WhatsApp messaging service about onions being imported from Pakistan.

A section of traders believes that a rally in onion prices is inevitable this year.

"Wholesale onion prices will hit Rs 35/kg to Rs 40/kg in September-October," said a wholesaler from New Delhi.