India has lifted the restrictions on export of onion that were imposed in the fiscal year 2023–24. The decision has been made after considering the supply, crop, and price situation and consultation with stakeholders. However, while lifting the ban, the government has imposed a minimum export price (MEP) of US$ 550 per tonne, along with 40% export duty, which will prevent a sudden surge in exports despite huge overseas demand.
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The Centre has recently lifted the prohibition on onion exports. The announcement follows a strong kharif crop yield in 2024, favorable monsoon predictions, and steady market conditions at the mandi and retail levels.
Nidhi Khare, Secretary, Department of Consumer Affairs stated, “This is basically taking into account the Rabi 2024 production and approved Kharif prospect because of above normal monsoon.”
She further added that the decision also takes into account, “the current market situation which was stable both at Mandi and retail, and also the international availability and prices situation.” The modal price at Lasalgaon mandi in Nashik was Rs 15 per kg in April.
Based on official estimates, the Rabi 2024 onion production of about 191 lakh tons appears to be quite substantial, especially when compared to the monthly domestic consumption of around 17 lakh tons.
The Rabi onion, harvested from April to June, constitute a significant portion, representing 65% of India’s total production. These play a crucial role in meeting consumer demand, providing a supply buffer until the Kharif crop is harvested later in October and November. This seasonal cycle helps ensure a continuous availability of onion in the market, supporting stability in prices and meeting consumer needs until the next harvest season.
The imposition and the lifting of onion export prohibition
The government restricted onion exports during the 2023-24 financial year. The decision to restrict was driven by constrained global supplies and a dry spell exacerbated by the El Niño weather phenomenon. On 8 December 2023, the government banned the export of onion till 31 March 2024, to regulate retail pricing in view of the anticipated decline in production. However, in March, the export prohibition was extended till further orders.
Lifting of the restriction was constantly being demanded by onion traders and farmers, especially those from Maharashtra. who argued that it will help them receive better prices for their produce. Nonetheless, the government remained reluctant, concerned that exports could drive up domestic costs of onion.
While lifting the ban, the government also announced a minimum export price of US$ 550 per metric ton for exports. Additionally, a 40% duty has been imposed on onion exports. The effective price of onion exports, therefore, will be US$ 770 per tonne.
Consumer Affairs Secretary informed, “The decision of lifting the export ban and imposing 40% duty on top of $550 MEP per tonne has been taken after consultation with stakeholders, and assessing the supply, crop and prices situation.”
Overall impact of lifting the ban
India, the world’s biggest exporter of onions, exported a record 2.5 m metric tons of the vegetable in the year-ending March 31, 2023. For many markets, as per the traders, India offers shorter shipment times than its competitors like Egypt or China. The country, therefore, accounts for over half of all the onion imported by Asian countries.
The Consumer Affairs Secretary stated that the shelf life of onion is less and therefore a need was felt to export onion.
Lifting of the ban would not lead to any price rise in retail markets, the Secretary assured, adding, “Prices will remain stable. If at all there is any increase, it should be very marginal.” The government is procuring 5 lakh tonnes of onions as buffer stock, so that it can intervene in the market in case of price rise, he further informed.
The government’s decision to lift the ban on onion exports subject to a minimum export price (MEP) of US$ 550 per tonne (around Rs 46 per kg) will benefit many farmers with ensuing increase in their income. Shipping below US$ 770 per tonne, about Rs 64 per kilogram, will not be allowed; with 40% export duty included.
As mentioned by the Secretary, “Lifting of the ban would also encourage the farmers to put more area under onion. The monsoon forecast is normal.” However, the current high MEP is not expected to bring an immediate increase in export given the price factor. Traders have reported that onion exports could stay at around 30% of normal in the coming months. On the other hand, domestic prices are expected to stay stable for now, considering trade inputs. While the rabi crop in Maharashtra and Madhya Pradesh is 9-10% and 20% lower respectively, per hectare yield has improved and crop quality is also good. This should keep the prices stable in the coming months if monsoons are favourable.
