Indian Government Lifts Export Restrictions on Onions

In a major effort to boost onion exports, the Indian government lifted the minimum export price (MEP) for onions. However, the 40% export duty remains in place. The Directorate-General of Foreign Trade (DGFT) announced this decision on Friday, with an immediate impact on the onion export market. The Cabinet Committee on Prices, led by the Home and Cooperation Minister, also discussed restrictions on other agricultural exports like rice, sugar, and ethanol.

El Niño Hits Onion Production in India

El Niño significantly affected India’s onion production, especially in Maharashtra, a key growing region. Droughts and long dry spells caused major losses in the 2023 onion harvest. To manage rising domestic prices, the government banned onion exports in December 2023. In May 2024, they lifted the ban but added a 40% export duty and MEP to stabilize the market. The Agriculture Ministry estimates that onion production for 2023-24 will reach 24.22 million tonnes, down from 30.20 million tonnes last year. This six-million-tonne gap led to a sharp rise in retail prices, prompting government action.

Political Sensitivity of Onion Prices in India

Onion prices in India often sway election results due to their political importance. The recent price surge has led to political consequences. The Bharatiya Janata Party (BJP) and its National Democratic Alliance (NDA) lost key seats in onion-growing regions like Maharashtra. The government removed the MEP ahead of the upcoming Assembly elections in Maharashtra, hoping to gain favor. However, onion trade is still waiting for clarity on the 40% export duty. Many expect further updates soon.

Kharif Onion Harvest to Boost Indian Supply

The Kharif onion harvest should lower domestic prices and ease market pressure. Harvesting has already started in Kurnool, Andhra Pradesh, and northern Karnataka, with Maharashtra following by late October. Crop Watch Weather Group reports that 0.29 million hectares of Kharif onions were planted by August 29, surpassing last year’s 0.194 million hectares for the same period. This year’s planting is already beyond the previous total of 0.285 million hectares, pointing to a healthy harvest.

Positive Outlook for Indian Exporters Despite Price Challenges

The government’s decision to lift the MEP on onion exports creates new opportunities for exporters. However, high domestic prices may still challenge global competitiveness. As the Kharif harvest stabilizes supply, exporters should keep an eye on domestic prices, which could impact international demand.

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