Onion prices fail to rise much despite lifting of Sep 2024 export curbs

Last month's lifting of an export duty of 20 per cent, imposed in September 2024, came too late as the export market had already been captured by the Pakistani crop

Onion prices in the wholesale markets of Lasalgaon and Pimpalgaon in Nashik district of Maharashtra had dropped by almost 32-34 per cent by middle of April since the start of the month despite the central government lifting a September 2024 export duty of 20 per cent.

 

While wholesale prices have recovered some lost ground since late April, and are now trading at around Rs 1150-1200 per quintal in both markets, the current levels are still lower than the price before the duty was lifted.

 

Lasalgaon and Pimpalgaon markets are considered the benchmark when it comes to onion pricing and the rates set there influences the entire country as they are the largest trading centres.

 

The export duty was lifted as prices had dropped dramatically in a span of less than two months and traders complained that the duty was outpricing Indian onions compared to their Pakistani competitors, which were cornering all the market share.

 

However, the recent price movement shows that despite lifting of the export duty, prices haven’t recovered by much.

 

In fact, for most of April, they remained even lower than levels seen before the imposition of the export duty.

 

What's keeping prices low?

 

The prime reason for this, some traders say, is that when India finally lifted the export duty in April and allowed free exports to resume, the market had already been captured by onions from Pakistan.

 

“There is some usual demand from Bangladesh and Gulf nations, which are our traditional buyers, but the damage had already been done due to the long ban on exports that was first imposed in December 2023,” a leading onion exporter from India said.

 

He said that India lifted the ban in May 2024 and replaced it with a Minimum Export Price (MEP) of $500 per tonne along with an export duty of 40 per cent, but the damage to the trade was already done.

 

Later, in September 2024, the Centre did away with even the MEP and lowered the duty from 40 per cent to 20 per cent which continued till April 1, 2025.

 

“This has made the period from December 2023 to April 2025 one of the longest times when onion exports were placed under some sort of control or the other,” the trader said. He declined to be named.

 

Later, though, all the curbs were lifted but it was too late; the market had already moved on, he points out.

 

“We expect some improvement in demand around Eid (in June) from Gulf nations and also Bangladesh, but how big that would be remains to be seen,” the trader said.

 

Prices have also failed to recover fully as the new onion crop for the 2025 rabi harvest is expected to be a bumper one.

 

Export curbs hurting market share

 

“It must be remembered that India annually produces around 22-23 million tonnes (MT) of onion, of which it exports just around 1-1.5 MT; therefore exports or the lack of it can never be the main determining factor behind prices," Danish Shah, another leading onion exporter and market expert, told Business Standard. "It is always the production and supply dynamics which is behind price rise or fall, but the government needlessly blames exports for the same and curbs free movement which leads to loss of markets.”

 

He pointed out that until a few years ago, India commanded a market share of almost 80 per cent in the global onion trade which has now come down to 40-50 per cent due to frequent bans and trade curbs.  Some traders said tinkering with duty levels is a better option when it came to onion exports rather than outright bans.

 

“We are not considered as a reliable onion exporter anymore and our competitors from Pakistan have taken over much of the trade,” Shah said.

 

“Around 8-9 MT of onions go waste every year due to lack of adequate storage facilities and just around 17 MT is left for consumption. If this onion is saved from getting damaged, then we can easily do an export of 5-6 MT which will also help in giving a good and stable price to farmers,” he added.

 

Storage can be the solution

 

Onion is typically cultivated three times in a year, with the rabi crop, generally harvested in April-May,  comprising bulk of the production and significant quantities of which is stored. The stored crop lasts till September-November, by which time the early kharif harvest starts coming in.

 

“Now, if the early kharif harvest gets delayed or damaged due to monsoon vagaries then the real crunch happens because the next crop (late kharif) comes only from the middle of January,” the trader quoted first said.

 

He said that is what makes the early kharif the most crucial among all the three onion crops that India harvests in a year.

 

“If early kharif onion crop is normal then prices don’t go up but if it is not up to the mark, then prices tend to move upwards as there is a vacuum in supplies,” the trader said.

 

Traders said in the ongoing rabi harvest, farmers’ production cost has soared to almost Rs 8-10 per kg and even if they store it for later sales at around Rs 15-20 per kg, then too they stand to make a profit.

 

“Therefore, instead of blaming exports for any rise in onion prices, the government should instead promote exports and we should improve our storage facilities so that damages are minimised. We should export more onions rather than banning them,” Shah said.