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Onion Scarcity: Government Puts Export on Hold Following 3 Year Peak

Exporters and traders are skeptical about the effectiveness of this tariff in reducing prices within the Indian markets. Even if exports are halted, they believe that domestic production falls short of meeting the demand.

By Rekha Joshi 
Updated Date

The imposition of a 40 percent export duty on onions by the Central Government has been prompted by India’s recent highest three-year record in onion exports.

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This decision arrives during a period of significant wholesale price increases across various markets.

At Lasalgaon, the primary wholesale onion market in Maharashtra’s Nashik district, prices have surged from Rs 1,000-1,100/quintal to over Rs 2,200-2,300/quintal since the beginning of August. This rise is largely attributed to lower-than-anticipated storage and arrivals. Retail markets have seen onions priced at Rs 30-35/kg.

Exporters and traders express doubts about the export duty’s ability to alleviate market prices in India. They believe that even with exports suspended, insufficient domestic production hinders meeting demands.

Data from the Agricultural Produce Export Promotion Development Authority (APEDA) reveals that India exported 25.25 lakh tonnes of onions in the 2022-23 fiscal year, a significant increase from 15.37 lakh tonnes in 2021-22 and 15.78 lakh tonnes in 2020-21.

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Robust demand for Indian onions, particularly from Bangladesh and the Middle East, has resulted in improved returns for exporters. Most of these exports took place during the first two quarters of the last fiscal year, before quality concerns surfaced.

Suresh Deshmukh, a commission agent operating in the Dindori wholesale market, noted that the current landed cost of onions in the Middle East and Bangladesh stands at Rs 2,400-2,500/quintal. He added that the new 40 percent import duty renders exports economically unviable.

While demand from Bangladesh and the Middle East remains strong, the existing duty structure threatens to halt exports. This situation is expected to influence domestic prices, Deshmukh stated.

Previously, Nashik farmers highlighted that the recent price surge followed a 40 percent loss due to storage-related quality issues. Considering the extent of the loss, the current prices barely cover production costs.

Following a prolonged dry spell in July of the prior year and untimely rains earlier this year, many farmers reported lower-than-anticipated production yields. Furthermore, early rains this year, followed by heat, have adversely affected the crop’s quality during storage.

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Some traders mentioned that they would need to assess their future strategies due to the sudden imposition of the duty. With some trucks en route to Bangladesh and others at the border, the abrupt decision is deemed unfavorable for trade, according to a trader based in Nashik.

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