India bans onion exports

Due to natural calamities like rains, onion production has declined. Despite government interventions like procuring onions through NAFED and selling them in the market at subsidized prices, onion prices in the Indian market have been increasing since the last 5-6 months.

The government initially imposed an export tax of 40% on onions, which was later reduced to 20% due to boycott by farmers and their organizations. But this did not help reduce exports and prices as expected. The government then imposed a minimum export duty (MEP) of $800/metric ton on onions, which slightly reduced exports as this rate was not applicable to all export destinations. Today, the Indian government has taken a major decision to ban on onion exports completely.

India’s export targets

India has set a target of USD 1 trillion in exports and USD 100 billion in agricultural exports by 2030. All government policies and infrastructure are aligned with this goal. However, the Indian government unexpectedly decided to ban or reduce the export of several commodities such as wheat, rice, sugar, etc. Currently, India has banned onion exports until the 31st.^{English Stone} March 2024.

Impact of onion export ban

What are the impacts of this onion export ban?

• India will miss $100 billion agricultural export target
• India’s share in global onion exports set to decline
• Export market countries will look for other suppliers
• India’s competitors like Pakistan, Egypt will gain advantage
• Countries like Bangladesh may decide to reduce imports of other Indian goods
• Farmers may avoid producing the crop, causing prices to rise.

Indian Onion Export Market

To understand this, we need to understand the supply and demand situation in the international market.In 21-22, India exported onions worth Rs 45.22 crore.If we consider the top ten export destinations, then by region, India exported more onions to the eastern countries, followed by the Gulf countries and European countries.

Top 10 onion exporters from India are listed below. You can check the onion export quantity, Indian Rupee value and average exchange rate of India throughout the year.

If we consider the top three countries in the list, Bangladesh, Sri Lanka and UAE will be affected by this decision. This will make these countries look for alternative supplies of onions, which they have been doing since last year due to the unpredictable policies of the Indian government.

Onion export rate

With the ban on Indian onion exports, other competitors like Pakistan, Egypt, Turkey, Afghanistan, Netherlands and China will benefit. The biggest competitor Pakistan will benefit from India’s decision. Pakistani onion prices are lower than India’s. In Sri Lanka, if the Indian onion price is 260 Sri Lankan rupees/kg, then the Pakistani onion price will be around 220 Sri Lankan rupees/kg. But Indian onions are spicy, while onions from Pakistan and other countries are sweet. If you consider the Dubai, UAE onion market, if the Indian onion price is 2 dirhams/kg, then the Pakistani onion price will be around 1.20 dirhams/kg. So all these international markets will choose onions from other countries, which can be a threat to Indian onions because customers are used to cheaper and sweeter onions. This can reduce India’s share in the global onion export market.

The export volume of Indian onions is mainly concentrated in Bangladesh, Malaysia, UAE and Sri Lanka. The average price of Indian onions is the highest in Mauritius at Rs 32/kg, followed by the UK at Rs 28/kg and Maldives at Rs 25/kg. Other potential markets include Indonesia, Vietnam, Qatar and Oman. New exporters should explore these markets.

India is the largest onion producer

The onion export ban will affect the largest onion-producing states in India. Farmers in these states are already unhappy with the government’s previous decisions. This could affect crop yields in the long term as farmers may choose to grow other crops, which could exacerbate the problem.

Farmers, onion traders and exporters from these states are confused about the future plans for onion exports. Many believe that the new crop will be in the market by January 2024, so the government will reconsider the decision.

in conclusion

Like onion, other commodities like wheat, rice, sugar, soya, pigeon pea, mung gram, cotton, milk etc. are also facing challenges due to the export and import policies. Uncertain export policies have hampered the growth of businesses at all levels and the entire economic cycle has been disrupted. Due to the ban on onion exports, the prices fell by Rs 5-6/kg on the first day, causing huge losses to farmers, traders and exporters. One cannot protect only one section of the society and ignore the rest, the government should consider the problems of everyone including the farmers. The government should give enough time to traders and exporters to plan their shipments and avoid any losses. Farmers and exporters across the country are expecting clarity from the Indian government on the import and export policies so that they can plan further.