India’s 40% Export Duty on Onion Will Send Prices in Malaysia, UAE, Bangladesh Over The Roof

Key Takeaways:

• India has imposed a 40% duty on onion exports
• The move comes as a measure to curb growing prices locally
• Prices will increase in several countries importing onion from India

YEREVAN (CoinChapter.com) — The price of onions might soon increase. If you live in a country that is a major importer of this vegetable, you can blame India for it. New Delhi is implementing a 40% export duty on onions until the end of this year. The goal is to enhance the availability of this vegetable and drive down its price within the country’s borders. 

The Indian Ministry of Finance conveyed the decision in an official notification released recently. 

India is among the world’s largest exporters of onions and contributes to as much as 12% of global onion trade. Countries in the neighborhood, including Bangladesh, Sri Lanka, and Nepal, will be most hit by the increase in export duty. 

Other nations that depend on imports from India include the United Arab Emirates (UAE) and Malaysia.

Exports of onions from India surged by 64% in terms of volume, reaching a six-year peak of 2.525 million tonnes during the fiscal year 2022-23. This remarkable increase comes from robust international demand and increased supply levels. 

In monetary terms, the value of onion exports experienced a 22% rise in comparison to the preceding year. According to official figures, it totaled $561 million. 

India has exported nearly 975,000 tonnes of onions between April 1 and August 4 fiscal year of 2023-24. However, the sharp increase in exports also created problems for the local markets. 

Onion prices are over the roof in India. Will the 40% export duty help?

Onion prices in India are over the roof. As often recorded in the country’s history, they have become a cause of a political storm. Several opposition leaders have criticized Prime Minister Narendra Modi for failing to curb the price surge. 

After maintaining a negative trend since September 2021, the inflation in onion prices surged to 11.72% in July of this year. This marked a significant increase from the 1.65% the previous month. 

This rise comes in response to reports of weakened Kharif (monsoon-season) cultivation. The delayed arrival of monsoon rains in the significant onion-producing states of Maharashtra and Karnataka is seen as a reason for it. 

Unanticipated rainfall in April in these states led to elevated moisture levels within the stored Rabi crop. As a result, the shelf life of onion got reduced due to the humidity. Reduced supply means shortages in the market, thus the price rise. 

As a consequence, the average retail price of onions across India surged to 30 rupees per kg or around $0.36. Meanwhile, experts suggest prices will increase further by the end of August. In September, it could even reach around ₹60-70 per kg. 

Meanwhile, several onion growers have come out to protest against the move. They fear that the policy might result in them getting a much lower price for their produce.

However the Indian Government has assured, that farmers will not have a problem selling their onions. In addition, the Central Government has announced it will buy more produce from farmers this year.

At least 5 Indian states will go to polls this year. In 2024, India will elect a fresh Parliament. Onions can play a spoilsport for the ruling BJP if the Government doesn’t control its inflation.

As a result, the Finance Ministry hopes curbing export will increase local supply, thus pushing down the prices of onions locally. Meanwhile, citizens of those countries importing from India will feel the brunt.