Global onion prices had surged in recent months after major suppliers, including India, Pakistan, and Egypt, banned exports. File
| Photo Credit: The Hindu

The Centre on Saturday lifted the prohibition on onion exports imposed nearly six months ago, but restrained the free flow of outbound shipments by stipulating a minimum export price of $550 per tonne as well as a 40% export duty.

The change in stance on exports of the critical kitchen staple, which were banned in early December 2023 citing high food inflation and supply worries, comes days ahead of the Lok Sabha election in the onion-farming belts of Gujarat and Maharashtra.

An April 25 decision to allow 2,000 tonnes of white onion exports from Gujarat, had prompted a sharp reaction from Opposition leaders, who alleged that Maharashtra farmers, who mainly grow red onions, had been short-changed by the Centre’s extended curbs on exports.

Global onion prices had surged in recent months after major suppliers, including India, Pakistan, and Egypt, banned exports. Reporting a 300% uptick in production, Egypt lifted those curbs last month, while Pakistan has also removed export restrictions recently.

‘Price stable now’

Asserting that the government will “continue to safeguard the interests of domestic consumers as well as farmers”, Consumer Affairs Secretary Nidhi Khare said the ban was reviewed after visits to key onion market hubs to assess the current situation.

“The mandi prices of onion in Lasalgoan Mandi [the country’s largest onion wholesale market in Maharashtra] has remained stable around ₹15 per kg since April. As a perishable crop, onion has to be consumed within five to six months so holding stocks beyond shelf life will only increase storage losses,” said the top Consumer Affairs Ministry official.

With a 40% duty levied on top of the minimum export price of $550 per tonne, effectively, Indian onion exports would now be feasible if global buyers are willing to pay at least $770 a tonne.

Explained | Why was a 40% duty imposed on onion exports?

“The ban had been imposed to boost domestic supply when there was an estimated 20% decline in Kharif and late Kharif production, and has helped stabilise prices till the arrival of the Rabi 2024 crop, which is estimated at 191 lakh tonnes,” Ms. Khare explained.

No supply worries

With India’s monthly domestic consumption of onions at about 17 lakh tonnes, the Rabi supplies are expected to be reasonably comfortable till arrival of the Kharif 2024-25 crop, whose prospects are good owing to the above-normal monsoon forecast for this year.

The new conditional exports regime, introduced through separate notifications by the Finance and Commerce Ministries over late Friday and early Saturday, kicks in immediately and will stay till further orders.

On April 27, two days after limited white onion exports were approved, the government sought to allay Maharashtra’s onion farmers’ concerns by stating it had allowed over 99,000 tonnes of onion exports to select countries.

However, the State’s farmer groups and traders had said this merely referred to export quotas for six countries already announced over the past two months to be channelled through the National Cooperative Exports Limited (NCEL). Less than 10% of that export quota has been used while the permission for white onion exports neither mandated NCEL’s involvement nor did it specify a destination country, they pointed out.

Amid an extended ban on onion exports, farmers and traders are miffed that some shipments allowed by the government to markets like the United Arab Emirates (UAE) have been sold at a pittance, even as global prices have soared, yielding windfall profits for selected importers.

An Indian farmer is being paid just ₹12 to ₹15 rupees for a kg of onions procured for export, but the same onions are then being sold in UAE stores for more than ₹120 per kg, exporters alleged.

Fearing a domestic shortage of the politically sensitive crop, the government had imposed a ban on export of the kitchen staple in December, extending it indefinitely “till further orders” last month. However, it had kept the window open for exports to countries in response to requests received through diplomatic channels.

On March 1, the Union government permitted the export of 14,400 metric tonnes (MT) of onions to the UAE, with a quarterly cap of 3,600 MT. While over 3,000 tonnes of such exports were cleared last month, the Commerce Ministry last week okayed an additional 10,000 MT of onions for the UAE, “over and above” the quarterly quota.

Also Read | Govt allows onion exports to Bangladesh, Mauritius, Bahrain, Bhutan

Mismatch with global rates

Usually, global onion prices hover in the $300-400 a tonne range. In recent months, however, rates have soared in major markets like the UAE to as high as $1500 a tonne, exacerbated by the export bans imposed by India, Pakistan, and Egypt.

India’s recent shipments to the country, however, have been sent at around $500 to $550 a tonne, exporters have learnt.

“UAE importers have already got windfall gains of over ₹300 crore through such shipments, and if this situation continues, another ₹1,000 crore is likely with the additional 10,000 MT quota opened up now, apart from the gains likely on the additional 3,600 tonnes of export quota available for that country till June,” a leading exporter of horticulture produce told The Hindu.

UAE importers benefit

These exports are being channelled exclusively through the National Cooperative Exports Limited (NCEL), a government-owned body under the Ministry of Cooperation. Exporters were told that exports were being done on a government-to-government basis, with the importing country allocating quotas to nominated importers. Procurements for such exports is being done through an e-tendering process on the Agribazaar portal.

On the UAE side, the importers identified to receive these shipments are learnt to be private traders and supermarket chains, not government agencies dealing with food security concerns. As is typical for trade deals, local onion suppliers are required to bid for the lowest possible price they can offer; buyers were also expected to be picked on the highest price offered, but exporters say that is not the case here.

Ambiguous price discovery

The Horticulture Produce Exporters’ Association has been seeking clarity on the process for permitting exports and setting the price for shipments. In an email to NCEL on March 25, it flagged concerns that the prices at which onions are being sold abroad are lower than international prices, which were about $1450 a tonne at the time. The mail, that was also marked to the Commerce and Consumer Affairs Ministries, noted that the buyers were not government bodies but government-nominated firms.

NCEL officials are learnt to have told Indian traders that they have no say in selecting the price and exporting entities, as that is being determined by an inter-Ministerial committee.

Detailed queries sent by The Hindu over the past week to the Ministries of Commerce, Consumer Affairs, and Cooperation on the modalities for determining the export price, and identifying the exporters and importers under this window, went unanswered. An Agriculture Ministry source said it was only concerned with providing crop estimates.

‘Importer-exporter nexus’

“Illustratively, if our farmers are selling onions at about ₹12 to ₹15 a kilo under the current system, even if you factor in shipping and packaging costs, the price being set for exports of about ₹40-45, is way lower than what the importing entities are selling at — around ₹120-₹130 in UAE stores,” said another exporter.

Last week, a delegation of horticulture exporters met top officials across concerned Ministries, seeking clarity on the situation, with some hinting that an importer-exporter nexus may be at work. They also mooted that exports through the NCEL to countries whose needs are not linked to food security should be linked to market prices.