India’s decision to impose a hefty 40% export duty on onions until the end of the year has raised concerns about a potential 50% drop in the country’s onion export volumes, according to sources familiar with the matter.
While, the new duty, implemented with immediate effect is looking to dampen the domestic prices of onion, for the international market its repercussions are expected to be significant. The move comes as India, a major onion exporter, experiences increased concerns over lower yields due to erratic rainfall patterns caused by factors like the El Niño weather phenomenon.
As per experts, the export duty will significantly hike the cost of Indian onions in the global market and render them less competitive in comparison to produce from countries like Pakistan, China, and Egypt. This is expected to result in a potential decline of up to 50% in onion exports.
The average wholesale onion price between July and August in key markets has already surged by almost 20%, reaching 2,400 rupees ($28.87) per 100 kg. The fear of lower yields due to erratic rainfall has driven up prices, prompting the Indian government to take proactive measures to stabilize the market.
Nearly 90% of India’s onion exports are sourced from Maharashtra, with over 70% coming solely from the Nashik district. As a result, this export duty is set to impact both farmers and traders within the country and abroad.
Exporters have voiced concerns that the imposition of the export duty could lead to a decrease in the profitability of onion farming, as the wholesale prices are anticipated to decline further due to this duty. The fear is that farmers will struggle to secure fair prices for their produce in the face of these market changes.
It’s worth noting that India’s onion exports witnessed a significant upswing of 63% during the first half of 2023 compared to the previous year, reaching a total of 1.46 million metric tons. This underscores the country’s pivotal role in catering to global demand for this staple ingredient, especially in countries such as Bangladesh, Nepal, Malaysia, United Arab Emirates, and Sri Lanka.
As the impact of India’s export duty unfolds, it is anticipated that other onion-exporting nations like China and Pakistan will respond with price hikes, given their limited surplus for exports. The broader implications of this move extend to the global onion market, affecting traditional dishes and cuisines across Asia, where onions serve as a foundational ingredient.
With the Indian government taking this proactive stance to curtail exports and stabilize domestic prices, attention is also focused on the broader inflation scenario in the country. As vegetable and cereal prices surge, India is grappling with the highest annual retail inflation in 15 months, prompting discussions about additional measures to address the mounting price pressures in various sectors.