Global concern over Indian onion export restrictions


Published on: January 15, 2024.

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Indian Onion Export Restrictions Create Global Concern

The recent decision by India, a key player in the global onion market, to extend the $800-per-tonne price cap for onion exports to Bangladesh until March of the following year has caused a stir. The unexpected move has led to a sudden surge in onion prices in Bangladesh’s market. As a result, local traders have started hoarding onions, driving prices through the roof. Despite the government’s efforts to stabilize prices through market raids and fines on price manipulators, previous attempts have proven futile. To ensure a continuous supply of onions and prevent skyrocketing prices that burden citizens, it is essential to find alternative sources for onion imports and resolve the ongoing Letter of Credit (LC) crisis.

Export Restrictions on Agricultural Commodities in India

The Indian government has made it clear that they have no plans to lift export restrictions on various agricultural commodities, including sugar, wheat, rice, and onions. These restrictions are aimed at increasing domestic availability and controlling prices. In recent times, the government has banned the export of white rice and imposed a 20% export duty on par-boiled rice to ensure an adequate domestic supply. Despite efforts to sell surplus rice in the open market, retail rice prices have continued to rise, leading the government to consider measures to address the situation. Wheat exports have been banned since May 2022, but India is expected to yield a record 114 million tonnes of wheat in the 2023-24 season. For the current season, the government has not allocated any quota for sugar exports. Consistent with their policy, the Indian government does not plan to lift restrictions on onion exports, as doing so would likely result in a spike in domestic prices. It is worth noting that mandi prices for onions have seen a significant drop since the export ban.

Implications of Export Restrictions

India’s prolonged restrictions on onion exports have caused prices in Bangladesh to soar. To address the local market price, the government has initiated the import of 52,000 metric tonnes of onions from India. The Ministry of Commerce has taken various measures to control onion prices and increase imports from alternative countries. The business community has also been urged to act responsibly and avoid exploiting the situation for profit. The efforts of the Directorate of National Consumer Rights Protection (DNCRP), including countrywide drives, have been aimed at controlling the prices of essential commodities, including onions. India’s 40% export duty on onions has led to an increase in the price of locally produced onions in Bangladesh. To tackle this issue, the government has approved the import of onions from nine other countries, including China, Egypt, Pakistan, Qatar, Turkey, Myanmar, Thailand, the Netherlands, and the UAE. Additionally, the Bangladesh Trade and Tariff Commission has proposed the withdrawal of the existing 10% duty on onion imports to cool down the market affected by India’s export restrictions.

Future Outlook

To control local prices, the Indian Ministry of Commerce has set a Minimum Export Price (MEP) of $1200 per metric ton for onions and shallots at freight on board (FOB). Export of onions will only be allowed under the condition of advance payment terms. The increased buying by exporters, driven by India’s export restrictions until March 2024, has caused local onion prices to surge to over Rs. 240 per kg. Exporters are now even purchasing limited supplies of Iranian and Kabul onions to meet export demand. This complex situation requires urgent measures to be taken.

Source: [BNN Breaking News](https://bnnbreaking.com)