The government on Saturday lifted its ban on export of onions as officials cited normal availability, stable prices and robust output from the winter crop, a move that will benefit traders and farmers of Maharashtra, the country’s biggest producer of the vegetable.
Simultaneously, India imposed a minimum export price (MEP) of $550 per tonne plus 40% tariff on outbound onion shipments. The floor price, below which traders can’t export, is designed to discourage cheap exports.
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“The export policy of onion is amended from prohibited to free subject to MEP of $550 per metric tonne with immediate effect and until further orders,” the directorate general of foreign trade said in a notification on Saturday.
India, the world’s biggest exporter of onion, banned overseas sales in December to boost local supplies after patchy rains in key states led to a 20% fall in output, worsening seasonal shortages and leading to a price spike.
The country’s ban had driven up prices of the vegetable for global buyers, from the Middle East to Bangladesh, who were left scrambling for cheaper alternatives. Prior to the ban, the government had slapped a 40% duty on exports, a measure that failed to ease prices of the essential item, leading to a full prohibition on exports.
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“The ban has been lifted basically taking into account reasonably comfortable rabi 2024 production of 19.1 million tonnes, good kharif prospects with above-normal monsoon forecast, international availability and current market situation,” consumer affairs secretary Nidhi Khare said. The country’s monthly consumption requirement is around 1.7 million tonnes.
“We will continue to monitor prices as usual. Prices have been stable at mandis (wholesale markets) and also at the retail level since April,” Khare said. The modal price (a type of average) of onions is ₹15 a kg (wholesale) at Lasalgoan in Maharashtra, Asia’s largest onion market, she added.
The government did not expect domestic prices to rebound as a result of the removal of the export restriction, she said. Domestic consumers are highly sensitive to prices of onion since it is the base ingredient of most Indian dishes. In 1998, the Bharatiya Janata Party is said to have lost the Delhi assembly elections due to an onion price spiral.
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The decision to the lift the ban, which helped cool local prices, will benefit traders and farmers in key onion belts of Maharashtra, such as Dindori, Nashik, Dhule, Sirdi and south Ahmednagar, regions where Lok Sabha elections are due in subsequent phases. The five-month-long export ban had angered farmers and traders, who had been intermittently protesting since February, demanding that the trade restrictions be lifted.
Asked about the timing of the decision to lift the ban, especially in view of the upcoming phases of Lok Sabha polls, Khare said: “We are not concerned with all that in any way. The decision was taken based on ground reports that show a very comfortable situation.”
Before taking a decision, a high-level team was deputed to tour onion-growing regions to assess stocks and states were extensively consulted several times followed by interministerial consultations, she added. “That’s why we got the confidence. Also, since harvest is good and onions have a shelf life of 4-6 months, not lifting the ban would have led to storage loss. Farmers would have hesitated to grow onion during the upcoming kharif season.”
A majority (about 80%) of the onion crop is grown in the winter season and sown during the two months of December and January. This crop is ready for harvest during April and May, which is the main harvest that meets most of India’s annual demand. A chunk of it is also exported.
A 40% export duty, which works out to $220 per tonne, along with a floor price of $550 per tonne means that Indian onions will be available for foreign buyers only at a minimum price of $770 per tonne.
Asked if the tariffs were too high and may result in too few exports, India’s director general of foreign trade Santosh Sarangi said: “We have benchmarked the MEP and export duty on freight-on-board and global prices. If we feel it’s on the higher side, we can always review the MEP.”
Traders appeared sceptical about the 40% duty, which could make Indian onion expensive for importers, said Narayan Wadhwane, secretary of Lasalgaon agricultural produce market committee in Maharashtra.
“The ban should have been lifted earlier. Traders are still confused about why there’s a duty over and above the MEP of $550 per tonne. We will get to know the export market demand only after about 15 days,” Wadhwane said.
