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Mint Explainer: Why has India imposed 40% export duty on onions?
Summary
- Inflation in onion prices, which had remained negative since September 2021, shot up to 11.72% in July
The government on Saturday imposed a 40% export duty on onions to improve domestic supplies and tame inflation during the upcoming festive season. The export duty will be in effect until December. The export duty on onions has been imposed for the first time amid a trend of “exceptionally high exports" this year. In 2019 the union government had fixed a minimum export price for onions, and in 2020 it had banned onion exports during September-December. Mint explains why India has imposed a 40% export duty on onions.
An export duty of 40% has been imposed on onions to discourage their export and curb the recent spike in prices of the vegetable. Inflation in onion prices, which had remained negative since September 2021, shot up to 11.72% in July this year as against 1.65% in June and -20.5% in July 2022.
Over the past couple of weeks onion prices have started to rise for the first time in almost two years amid reports of weak Kharif sowing due to the late arrival of the monsoon in the key onion producing states of Maharashtra and Karnataka.
Unseasonal rain in Maharashtra and Karnataka in April caused high moisture content in the stored Rabi crop, reducing shelf life of the kitchen essential. This sparked fears of supply tightness by September. All-India average retail onion prices rose to ₹30 a kg on Saturday from ₹20 at the start of the year, according to the consumer affairs department.
Crisil, a rating agency, said in a recent report that retail onion prices are expected to hit ₹60-70 a kilo next month. Leading agricultural economist Ashok Gulati told Mint that onion prices are expected to increase and may even hit ₹100 a kilo by the end of September.
Prices at Lasalgaon, Maharashtra, the hub of India’s onion trade, rose by 50% to ₹2,050 a quintal on Saturday from ₹1,370 on 2 August. Prices were around ₹950 a quintal two months ago. The government recently announced it would sell 300,000 tonnes of onions from its buffer stock on the open market to keep prices in check.
India’s onion exports rose 65% on-year to a record 2.5 million tonnes in 2022-23. It is the biggest onion producer in the world – with Maharashtra, Karnataka, Madhya Pradesh and Gujarat contributing more than 70% to the output basket – followed by China and Egypt.
