Maharashtra onion growers and exporters left in the lurch

Alarmed at high onion prices in the run up to the Lok Sabha elections, and following the announcement of the election schedule in mid-March, the Union government last week extended a ban on the export of onions until further orders, resulting in a surplus in the domestic market and a decline in domestic prices.

The ban was initially in place until 31 March, but in a notification dated 22 March, the Directorate General of Foreign Trade (DGFT) said, “Export prohibition on export of onions valid till 31st March 2024, is extended until further orders.”

Restrictions on imports and exports are typically intended to achieve policy objectives and control prices. Conscious of the volatile price of onions, an essential ingredient of cooking for a large number of Indians, and that past elections have been won or lost on onion prices, the government clearly did not want to take chances.

As an exceptional case, the government did, however, allow export of a limited quantity of onions to Bangladesh and the United Arab Emirates (UAE).

The ban is expected to keep prices low in urban areas during the election and prevent embarrassment to the ruling party in urban constituencies. The ‘surprise move’ ahead of the general election will, however, cost India some goodwill by exacerbating high prices in overseas markets.

India happens to be the world's biggest exporter of the vegetable. Traders had anticipated that the ban would be lifted as domestic prices have more than halved since the export restrictions were implemented, and this season's crop is yielding fresh supplies.

"The extension is surprising and completely unnecessary, considering the falling prices with rising supplies from the new season crop," an executive at a Mumbai-based export firm told news agency Reuters.

Maharashtra will be the worst affected, with onion prices in some wholesale markets in India's highest onion-producing state falling to Rs 1,200 per 100 kg from Rs 4,500 in December 2023.

On the other hand, countries such as Bangladesh, Malaysia, Nepal and the UAE rely on imports from India to fill domestic gaps in onion supply, and have struggled with high prices since the ban. India exported a record 2.5 million metric tonne of onions in the financial year ending 31 March 2023.

Chandigarh-based agriculture policy expert Devinder Sharma agreed that lower prices would affect the income of onion farmers and exporters. There was nothing wrong, he felt, if the government wanted to keep prices low to benefit the domestic consumer, but then the government must develop a mechanism to compensate farmers and exporters for the loss.

According to agency and media reports, amid concerns over the likely fall in mandi (wholesale market) prices in view of the export ban extension, the government has assured farmers that it will begin the procurement of 5 lakh tonnes of rabi (spring harvest) onion from 1 April to protect their interests.

With agency inputs