Onion prices are projected to fall further from the current two-year lows, as the market will see additional supply from late kharif harvest.

Expecting an oversupply situation, the government has lifted all restrictions on export of onions. This move resulted in onion exports from India "dominating" all major overseas markets, including Malaysia, Sri Lanka and West Asian nations, The Economic Times reports.

Even after lifting export restrictions, onion prices continued to fall making farmers halt auctions for a few hours at the Pimpalgaon Baswant in Maharashtra's Nashik district, Tuesday.

"The decline in prices was expected. Prices may decline further by another Re 1 per kg and stabilise at Rs 6.5 per kg," Ajit Shah, president of Onion Exporters Association of India, told the daily.

Removal of restrictions on exports has failed to arrest the decline in onion prices, he said.

Markets across the country are witnessing a rise in supply of onions.

Pimpalgaon APMC (agricultural produce marketing committee) saw an increase in onion supply by 1.5 lakh quintals in January compared to same month last year, said Dilip Bankar, chairman of the Pimpalgaon APMC.

Demand for onion from net importers such as Delhi and West Bengal has fallen due to availability of onions in all parts of the country.

"Onion is abundantly available in Maharashtra as well as all other states," said Danish Shah, one of the oldest onion exporters in the country.

In August last year, onion prices touched a two-year high amid a continued fall in supply due to delay in harvesting and concerns over poor monsoon.