The onion market is a headache for the Indian government. Under pressure from farmers and exporters, the country scrapped the export duty on onions this month. Exports started to pick up again as a result and prices rose. Domestic consumers also have to pay more for onions. The Indian government finds this undesirable, so measures are being taken to reduce domestic prices.
In May 2024, the Modi government lifted the export ban on onions and replaced it with a 40% export duty, with a minimum price of $550 per tonne. That hit Indian exporters hard, with an estimated 200% drop in exports since the export duty was imposed compared to a year earlier. “Indian onions are about $XNUMX more expensive than our competitors,” Ajit Shah, former president of the Horticultural Produce Exporters’ Association, told the India Economic Times.
Conflicting interests
Traders and farmers have therefore strongly urged the government to abolish the export tax. Not without success. On September 13, the export tax was abolished by the government. Onion prices in India have risen sharply after the removal of the export restrictions. This conflicts with the interests of the Indian Ministry of Consumer Affairs. "We expect a price increase after the removal of the export tax. With our intervention stock of 470.000 tonnes of onions and a larger sown area in the kharif season (summer season that runs from June to October), we expect to be able to keep the prices under control," said Nidhi Khare, Minister of Consumer Affairs during a press conference.
In concrete terms, this means that India is marketing onions from intervention stocks at a reduced rate. In the cities where onions are most expensive, onions from intervention stocks are sold directly to consumers for 35 rupees per kilo (approximately €0,37). In Delhi, the average retail price for onions is 55 rupees per kilo (approximately €0,59), according to official statistics. A year ago, onions cost 38 rupees (approximately €0,41) in Delhi. In Bombay and Chennai, the consumer price is slightly higher, at 58 and 60 rupees per kilo (€0,62 and €0,64), respectively.