Export Duty Levied on Onions Increased to 40 Percent
The central government slapped an increased 40% export duty on onions in order to curb its present price rise and surging exports. This could be an attempt to manage food inflation keeping in mind the upcoming elections.
As the ‘tomato torment’ eases a bit, are we headed for an ‘onion oppression’? Well, the Centre is leaving no stone unturned to tackle such a situation. The finance ministry on August 19 increased the export duty on onions to 40% by December 31, 2023, with an intent to stabilize domestic onion prices by limiting exports.
So what caused this price hike? Well, the chain of events goes back to February, which encountered higher-than-normal temperatures. Onions thrive in mild weather conditions. The sudden rise in temperature in February caused the crop to mature untimely, resulting in small-sized and low-quality produce, which were deemed unfit for sale.
On top of that, the unseasonal rainfall and hail storms in major onion-growing regions during March, just before the harvest season, had a detrimental effect on around 40% of onion crops and reduced their shelf life. This led to a shortage of stored produce.
Further, the country saw a decline in onion acreage. Many farmers have opted to grow other crops instead of onions, lowering the area under production from 3.76 lakh hectares to 3.29 lakh. As a combined effect of all these factors, onion prices have seen a steep rise since August. Amid the domestic crisis, the high demand for Indian onions in International markets like Bangladesh and West Asia has prompted the central government to impose a 40% export duty on onions to ensure its adequate supply in the domestic market and prevent further price rises.
But have you thought why the BJP government is so desperate to put the lid on rising onion prices? The answer is the most threatening combination in Indian politics – inflation and elections! Onion has always been a highly political vegetable with the ability to make or break governments. The current government realizes this and that’s why the attempt to reign in its price rise. In order to placate the farmers and traders protesting against the export duty surge, on August 22, Union Minister Piyush Goyal announced that the Centre would buy 2 lakh tonnes of onion at a “historically high” rate of Rs 2410 per quintal. Also, the government has also increased the buffer stock to 5 million tonnes. So, fingers crossed, the price will come down, but at what cost? India is one of the largest exporters of onions in the world. In the first half of 2023, trade was up by 63%. How will the dozens of countries who buy onions from India react to this sudden move? Guess we have to wait and watch to find out the answer.
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