Politics of Maharashtra heats up as govt imposes 40% export duty on onion

Just as onions are layered, so is the politics around this humble bulb that finds itself on the political chopping board, yet again. SANJEEB MUKHERJEE writes

Last week, the central government, in a sudden move, imposed a hefty 40 per cent export duty on onions to improve supplies in the domestic market and cool down prices.

The step was taken after onion prices in major mandis in Maharashtra and elsewhere jumped by almost 75 per cent in a span of nearly 20 days due to low supplies amid firm demand.

Reports of damage to the kharif onion crop and its delayed harvest due to late sowing also triggered bullish sentiment.

The clampdown stunned the farmers and growers who, after suffering a series of setbacks with the onion crop in March and April, were expecting some decent returns from the kharif harvest.

The onions that they had stored from the rabi harvest were also fetching a better price.

However, according to a CRISIL report this year, the rabi onions were of inferior quality compared to previous years and would not have lasted the full lean season.

Rabi onion is also the most storable of all, as it has low moisture content.

Low stocks, coupled with some uncertainty over the kharif harvest, meant that prices jumped.

Between April and June of 2023, compared to the same period last year, onion exports from India jumped by almost 27 per cent to 630,089 tonnes.

The sudden duty announcement caught farmers and traders unawares, and they went on a flash strike, deciding to stop the auction of the crop in Nashik, the country’s biggest onion trading centre.

There were protests in Madhya Pradesh (MP) as well, which is also a major producing state and more importantly goes to polls in the next few months. 

The events that followed the strike were somewhat unprecedented in terms of the speed at which they were taken, signifying the churn happening in Maharashtra politics.

Immediately after the strike call and protests, sources said delegations of senior leaders from the Bharatiya Janata Party’s (BJP’s) newest ally, the Nationalist Congress Party (NCP)-Ajit Pawar faction, decided to meet the Union ministers to press forward the grievance of the growers.

Calls went out to everyone in the state, including Deputy Chief Minister (CM) Ajit Pawar, CM Eknath Shinde, and even Deputy CM Devendra Fadnavis, who at that time was in Japan, to avert the crisis from escalating.

As a result, even before the leaders came to meet in Delhi, a decision was already in the works by the central government to purchase an additional 200,000 tonnes of onions from the farmers at a price of Rs 24.1 per quintal from state-supported National Agricultural Cooperative Marketing Federation (Nafed) of India and the National Cooperative Consumers’ Federation (NCCF) of India to create a buffer.

This was among the highest prices at which onions have ever been bought from farmers.

Surprisingly, the rate at which Nafed and NCCF decided to purchase onions was tantalisingly close to the rate at which onions were exported before the duty was levied (that is, around $320 per tonne, or approximately Rs 26.5 per kilogram, or kg).

Procurement centres have been opened both in Maharashtra and MP to ensure that farmers don’t suffer due to the duty and get a reasonable enough price.

Maharashtra Agriculture Minister Dhananjay Munde, expressing satisfaction at the central decision, said that the price paid for procurement is even higher than what farmers in Maharashtra were getting before the duty (which, according to him, was Rs 18–19 per kg).

But that’s not all.

Weeks before the onion crisis unpeeled, the central government cleared a long-pending imbroglio over the tax on payment of sugarcane prices above the fair and remunerative price (FRP) or statutory minimum price (SMP).

As a consequence of this settlement, several cooperative sugar mills in Maharashtra are now looking to pay a cane price that is Rs 20–30 per quintal more than the average FRP for the 2023–24 season to farmers, according to industry sources.

This could be a bonanza for approximately 8.5 million farmers in the state associated with these cooperative sugar mills as members.

In the 2020–21 sugarcane season (October–September), the average FRP paid by cooperative sugar mills in Maharashtra was Rs 319 per quintal, which rose to Rs 324 per quintal in the 2021–22 season.

And, in the 2022–23 season, cooperative sugar mills in Maharashtra paid an average FRP of Rs 333 per quintal.

Sources said that in the past few years, cooperative sugar mills in the state were wary of paying anything above the designated average FRP that is calculated based on recovery, as there wasn’t any clarity on whether such an excess payment would be considered a distribution of profit or business expenditure.

However, with the income-tax department clearing the air on this by laying down the rules through which cooperative sugar mills can claim past cane prices paid to farmers in excess of the FRP or SMP as business expenditure a few months ago, several mills are looking to restart making extra payments to farmers over the designated FRP from the next season onwards.