Indian govt imposes 40% export duty on onions to curb soaring local prices

The Union government of India has taken measures to curb rising onion prices in the domestic market by imposing a 40 per centduty on onion exports until December 31. This move was confirmed by a government notification reported by news agency PTI.

The government notification clearly states, "Government imposes 40 per centduty on onion exports till December 31," thereby emphasising the temporary nature of this export duty.

As per reports, India stood at number one amoung the world's top onion-producing countries in 2020-2021. India produced 26.6 million tonnes, China 24.2 million tonnes and Egypt 3.3 million tonnes. Meanwhile, the production of onion in India in 2020-2021 was 26.6 million tonnes in 2021-22, it was 31.7 million tonnes and in 2022-2023, it stands at 31.0 million tonnes.India's top onion-producing states are Maharashtra (43 percent), MP (16 percent) and Gujarat (9 percent).

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Context: Rising onion prices

This increase in export duty is a response to concerns that onion prices are likely to surge in September. To address this issue, the government had recently announced the immediate release of onions from its buffer stock in specific regions. The aim was to stabilise prices until the arrival of the new crop in October.

Distribution channels and stockpiling

The government has been actively exploring various distribution channels for onions, including e-auctions, e-commerce platforms, and partnerships with state authorities. These partnerships aim to offer discounts on onions through retail outlets managed by consumer cooperatives and corporations.

Currently, the government holds a significant stockpile of 300,000 metric tonnes of onions within the Price Stabilisation Fund (PSF) to manage any unforeseen price spikes during periods of low supply.

Price trends

Government data indicates that the cost of onions has experienced a slight increase. As of August 10, the all-India retail price for this essential kitchen staple stood at Rs 27.90 ($0.34) per kilogram. This represents an increase of just over Rs 2 per kilogram compared to the same period last year.

Buffer stock and procurement

To manage onion prices effectively, the National Cooperative Consumers' Federation of India (NCCF) and the National Agricultural Cooperative Marketing Federation of India (NAFED) had earlier procured 150,000 metrictonnes of onioneach from Maharashtra and Madhya Pradesh.

Furthermore, the government has initiated a pilot project in collaboration with the Bhabha Atomic Research Centre (BARC) to irradiate onions, extending their shelf life.

Buffer expansion for price stability

The annual buffer for onions has been significantly increased, rising from 100,000 metrictonnes in 2020-21 to 300,000 metrictonnes in 2023-24. This expansion is attributed to the procurement of Rabi (winter crops) season onions, which are released in high consumption areas during lean seasons.

A statement from the Ministry of Consumer Affairs highlighted the vital role played by the onion buffer in ensuring consumer access to onions at affordable prices while maintaining price stability.

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Seasonal supply and demand

India typically receives nearly 65 per cent of its onion supply from the Rabi season, harvested from April to June. These onions meet consumer demand until the Kharif crop (harvested at the end of monsoon season) is harvested in October-November.

In sum, the government's imposition of an export duty on onions reflects its commitment to stabilise domestic prices, enhance distribution mechanisms, and manage the impact of seasonal variations on onion availability and affordability.

(With inputs from agencies)

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