In a move to counter rising prices and ensure ample domestic supply, the government has introduced a 40 percent export duty on onions. This marks the first-ever imposition of an export duty on this kitchen staple. The decision comes as retail prices for onions reached Rs 37/kg in Delhi, as per government data.
The Finance Ministry, through a Customs notification, has implemented a 40 percent export duty on onions until December 31, 2023. This step aims to curtail the export of onions and maintain adequate availability within the country.
Context and Rationale
Between April 1 and August 4 of this fiscal year, approximately 9.75 lakh tonnes of onions have been exported. The government's move is particularly aimed at bolstering the domestic onion market in preparation for the upcoming festival season, which typically sees a surge in demand.
Officials noted a significant increase in onion exports recently, prompting the government to take action. While historically, a minimum export price tool was employed to control onion exports, this year, the imposition of an export duty has been introduced to more effectively manage outward shipments.
Onion Price Landscape
The all-India average retail price of onions stood at Rs 30.72 per kg, with prices ranging from Rs 10 to Rs 63 per kg. In Delhi, the price reached Rs 37 per kg. Trade data reflected onion prices at Rs 50 per kg in the national capital.
Onion prices have experienced an upward trend due to reported delays in onion cultivation during the ongoing kharif season. In July, onion inflation reached 7.13 percent according to the wholesale price index (WPI) data. The government has maintained a buffer stock of 3 lakh tonnes of onions, some of which has already been released in key markets.
The government typically employs buffer stock to intervene in the market during lean periods, such as the months between August and September, when the arrival of fresh crops is awaited.
Political and Economic Implications
Onion, being a politically-sensitive commodity, has led to this restriction. The imposition of an export duty comes ahead of key assembly elections in states like Madhya Pradesh, Chhattisgarh, and Telangana, scheduled for the end of the year.
The government's proactive approach seeks to stabilize onion prices, ensure domestic availability, and manage economic and political pressures as India heads into a crucial electoral period.