Why onion prices remain bullish despite steep export duty, MEP

A look at why onion prices continue to remain on the higher side and why there might be little the government can do to cool it down.

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The central government since last year has maintained a hawkish attitude towards onions. (Express Archives)

Notwithstanding a significant dip in exports, onion prices continue to be on the higher side across India. The kitchen staple in most retail markets is now being sold at Rs 35-45 per kg (Source: Price Monitoring Cell, Ministry of Consumer Affairs). A look at why onion prices continue to remain on the higher side and why there might be little the government can do to cool it down.

Why retail prices of onion continue to be on the higher side?

One of the main reasons is the lower-than-expected rabi acreage of last year. Planted in December-January and harvested post-March, rabi onion accounts for more than 72-75 per cent of the total onion consumed in the country. This year, the central government had estimated production of around 191 lakh tonnes of rabi onion in the country, which a press statement issued by the Press Information Bureau (PIB) was enough to meet domestic requirements. As compared to 12.26 lakh hectares of rabi onion area reported in 2023, the current year has seen around 7.56 lakh hectares of sowing.

Also Read | Their biggest market hit, Bangladesh crisis has onion exporters worried

Kharif sowing this year has been lower than usual, with the country reporting 1.54 lakh hectares as against 2.85 lakh hectares last year. (Source: Ministry of Agriculture). However, this area is set to increase as Nashik and other areas have reported good rainfall and sowing is expected to be higher than usual.

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Most farmers, market watchers say, have kept their harvested rabi onions with them and have delayed offloading. “The present price rise is because of two main reasons — lesser arrivals and fear about kharif crop. Prices can come down when the new crop is expected later in the year,” said a trader in Lasalgaon’s wholesale market in Nashik. Located in Niphad taluka, Lasalgoan’s wholesale market is the biggest onion market in the country.

So will there be any more government intervention to bring down onion prices?

The central government since last year has maintained a hawkish attitude towards onions. Technically, exports are allowed but high export duty of 40 per cent and MEP of $550/tonne has literally stopped all exports. The latest export figures show that India, which is one of the major exporters of the bulb, has shipped out 91,316.31 tonnes of the bulb (Source: Agricultural Produce Export Promotion Development Authority (APEDA), a far cry from the annual 24-25 lakh tonnes India normally used to export. Any more intervention would mean either raising the MEP or export duty or importing onion. But that is unlikely given the political implications of any such move.

What can be the political implications of further government intervention?

Last week, Maharashtra Deputy Chief Minister Ajit Pawar publicly “apologised” for the export ban. Pawar’s statement was a deep reflection of the anxiety in political circles over the issue. It was the decision to ban onion exports, which cost the ruling alliance all the seats in the onion belt of the state in the Lok Sabha polls. BJP bigwigs like former minister Bharati Pawar, Pankaja Munde and Sujay Vikhe-Patil lost to relative newcomers.

Bharat Dighole, president of the Onion Growers’ Association, however, criticised Pawar. “Pawar also said there would be no more ban on onion exports but export duty and MEP still remains. The decision to ban onion exports is taken at the central level and not at the state government level,” he said. The onion belt has 48 Assembly seats and during the last assembly polls the NDA had swept the belt.

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Also Read | Onion exports turn out to be a damp squib

What is the outlook for onions in the next few months?

Onion traders said they do not see any immediate price drop in the commodity. “Once the new crop arrives, we foresee a significant drop in prices,” said a trader in Nashik. Exports continue to be a thorn despite demand from traditional markets like Bangladesh, Sri Lanka and UAE. The present turmoil in Bangladesh temporarily halted exports but now they have resumed. But India no longer is the only source for these markets any more — Pakistan and Turkey are fast filling the gap and, once the new crop comes, prices are likely to drop significantly in domestic markets.

Parthasarathi Biswas

Partha Sarathi Biwas is an Assistant Editor with The Indian Express with 10+ years of experience in reporting on Agriculture, Commodities and Developmental issues. He has been with The Indian Express since 2011 and earlier worked with DNA. Partha's report about Farmers Producer Companies (FPC) as well long pieces on various agricultural issues have been cited by various academic publications including those published by the Government of India. He is often invited as a visiting faculty to various schools of journalism to talk about development journalism and rural reporting. In his spare time Partha trains for marathons and has participated in multiple marathons and half marathons. ... Read More

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