Explained: Economics and politics — why govt has banned export of onionshttps://indianexpress.com/article/explained/explained-both-economics-and-politics-why-govt-has-decided-to-ban-export-of-onions-6040035/

Explained: Economics and politics — why govt has banned export of onions

The retail prices of onions in most cities have since then crossed the Rs 60/- per kg mark, resulting in a slew of measures by the government to control it.

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With Maharashtra and Haryana going to the polls in less than a month, the last thing the central government wants is to face any potential backlash from voters due to high onion prices.

The Centre on Sunday announced a ban on the export of onion to control the retail price hike of the bulb in markets across the country.

Onion pricing has always remained a touchy matter for any government, given the political sensitivity towards the issue. The skyrocketing of onion prices was said to be the cause of the downfall of the Sushma Swaraj-led state government in Delhi in 1998. Around four years later, the Congress-led government faced a similar situation as the issue was relentlessly raised by the opposition parties.

With Maharashtra and Haryana going to the polls in less than a month, the last thing the central government wants is to face any potential backlash from voters due to high onion prices.

Both the central and state governments had maintained a strict watch over the bulb rates since June amid reports of a possible dip in production from the main onion growing states of Maharashtra and Karnataka. Earlier this year, the government had discontinued the 10 per cent export subsidy given to the bulb.

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The wholesale rates of the bulb have been on the rise since May and crossed the four-year high mark post-August. The retail prices in most cities have since then crossed the Rs 60/- per kg mark, resulting in a slew of measures by the government to control it.

Earlier this month, state-owned MMTC had floated tenders to import 2,000 tonnes of onion. Efforts were taken to can exports by raising the minimum export price (MEP) of the bulb to a steep $850/- per tonne. In simple words, the outbound consignments of the onion could be allowed if they are priced at or above $850/- per tonne. Sunday’s notification now puts a ban on the export from the country.

Traders point out that even at the present wholesale prices of Rs 36/- per kg (the average recorded price at Lasalgaon’s market in Niphad taluka of Nashik district), Indian onions have a neat parity both in the middle eastern and Singaporean markets. The transportation and packing costs add up to around Rs 10/- per kg with freight and other expenses adding to around Rs 50/- per kg.

Also read | Nashik: Onion markets remain shut as traders and farmers protest against export ban

At present, the price of onions at the Dubai and Singaporean markets vary between Rs 55-60/- per kg which can only allow a small margin. By stopping all exports, the government hopes to stem the outbound shipments and make more onions available in the domestic markets.

The present price hike is mainly due to a shortage due to a drought in Maharashtra and Karnataka. The central team, which had visited Maharashtra earlier this month, has informed of the availability of around two months worth of supply in the country.

The price rise is a challenge for the BJP-led government in Maharashtra as it has to walk the thin line of not upsetting the onion growing farmers while trying to ensure urban voters are not affected by higher prices.

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