Centre withdraws 20% onion export duty as prices slump

With onion prices dropping by almost 30-40 per cent since late February, the Centre has removed the 20 per cent duty on exports with effect from April 1.

 

The duty was in place since September 13, 2024.

 

“The decision stands as another testament to the government’s commitment to ensuring remunerative prices to farmers while maintaining affordability of onion to the consumers at this crucial juncture when both mandi and retail prices have softened following expected arrival of rabi crops in good quantities,” an official statement said.

 

It said that despite the export curbs, India has exported around 1.71 million tonnes of onions in FY24 while in FY25 (till March 18) around 1.16 million tonnes has already been exported.

 

 

As per the estimates of the Department of Agriculture, rabi onion production this year is estimated at 22.7 million tonnes which is almost 18 per cent higher than 19.2 million tonnes of last year.

 

The rabi onion which accounted for 70-75 per cent of India’s total onion production is crucial for overall availability and stability in prices till the arrival of kharif crop from October and November onward.

 

The estimated higher production this season is expected to further ease the market prices in coming months, the official statement said.

 

Onion prices in Nashik, the main producing centre, and also in consuming markets like Delhi have dropped between 30-40 per cent since late February.

 

A major reason for the drop has been heightened supplies in the domestic markets due to arrival of new rabi crops from Madhya Pradesh, Maharashtra, Gujarat and continued curb on exports.

 

The export duty of 20 per cent on onions exported out of the country has made the Indian bulb pricier which had resulted in it being outpriced in the global markets from onions sourced from Pakistan, its nearest competitor.

 

Data shows that in November 2024, India exported onions worth $52.79 million which was almost 47 per cent less than the corresponding month of the previous year.

 

Between April to December 2024, India exported around $392 million worth of onions, while in the whole of Fy-24, it exported onions worth around $500 million.

 

Bangladesh, accounted for almost 48 per cent of these exports, followed by Malaysia. In December 2023, India first banned exports of onions to check domestic prices.

 

Thereafter, it lifted the ban in May 2024 and replaced it with a Minimum Export Price (MEP) of $550 per tonne and also an export tax of 40 per cent.

 

In September 2024, though the MEP was lifted but the export duty was not abolished instead it was lowered from 40 per cent to 20 per cent which still continues.

 

“In September 2024, an export duty of 20 per cent made sense but now as the new crop has started arriving, the export duty was hurting farmers,” a senior industry official said.

 

Infact, Onion exports have been under some sort of restriction since December 2023 making it perhaps one of the longest time periods when the crop has been under some sort of curb.

 

In India, typically, onion prices tend to increase during the lean months of September to December, while it falls thereafter, due to its perishable nature and gap between the rabi and kharif crops.

 

India annually produces around 28-30 million tonnes of onions and is among the world’s largest producers of the crop. The crop is usually planted three times in a year.

 

First is kharif which is planted in between July and August and harvest sometime October-December), then is late kharif which is planted in around October-November and harvested in January-March and the third is rabi onions which is planted between December and January and harvested between March and May.

 

Of the three, rabi onions contribute around 75 per cent of the country’s total annual production and are more storable as compared to the others. Onions also suffer from low price elasticity to demand.