India Onion Export Ban… What are the implications?

Because of natural calamities like rain, Onion production is taking a dip. Because of this Onion prices in Indian market are rising up since last 5-6 months in spite of government interventions like purchasing onion through NAFED and selling it in market at subsidized rates.

Government first implied 40% Export Duty on Onion then reduced it to 20% because of resistance of farmers and their organizations. But this didn’t help reduce export and prices as intended. Then Government implied 800$/Mt MEP (Minimum Export Duty) on Onion and it reduced export little bit as this rate was not feasible for all export destination countries. And today government of India took a big decision of completely prohibiting Onion Export.

India’s Export Target

India has set an export target of $ 1 Trillion till 2030 and Agri Export Target of $ 100 Billion.  All government policies, infrastructure is aligned to this target. Still Indian government has taken unexpected decisions of banning or reducing export of many commodities like wheat, rice, sugar etc. Now Onion Export in India is banned till 31^st March 2024.

Implications of Onion Export Ban

What are implications of this onion export ban?

• India will not be able to achieve Agri Export Target of $ 100 Billion
• India’s share in world’s Onion Export will be reduced
• Export market countries will find another supplier countries
• India’s competitors like Pakistan, Egypt will get advantage
• Countries like Bangladesh may take decisions to reduce import of other Indian goods
• Farmers may avoid producing this crop which will result in price rise

India’s Onion Export Market

To understand it we need to look at demand and supply in international markets. In 21-22 India exported Onion worth Rs. 4522 Cr. If we consider top 10 export destinations then region wise India exported onion more to East countries and then to Gulf and Europe countries.

India’s top 10 Onion Export Countries are as following. You can see the Onion export quantity, value in INR and average rate India received considering whole year.

If you consider top 3 in this list, Bangladesh, Srilanka and UAE will be hit by this decision. This will make these countries find alternative supply for onion which they are already doing since last year because of unpredictable policies of Indian Government.

Onion Export Rate

As Indian Onion Export is banned, other competitors like Pakistan, Egypt, Turkey, Afghanistan, Holland and China will gain mileage. The biggest competitor Pakistan will be benefitted by India’s decision. Pakistan Onion price is less than India. In Srilanka if Indian Onion price is 260 LKR / Kg, then Pakistan Onion price will be around 220 LKR/Kg. But Indian Onion is spicy and Pakistan’s and other country’s Onion is sweet in taste. And if you consider Dubai, UAE Onion market, if Indian Onion price is 2 AED/Kg then Pakistani Onion will be available around 1.20 AED/Kg. So these all international markets will go for other country’s onion which can be a threat for Indian onion in future as customers are getting used to cheaper and sweet taste onion. It might reduce India’s Onion Export share in global market.

Indian Onion got the export volume in Bangladesh, Malaysia, UAE and Sri Lanka. Indian Onion got highest average rate of 32 Rs/ Kg in Mauritius, then 28 Rs/Kg in UK and then 25 Rs/Kg in Maldives. Other potential markets are Indonesia, Vietnam, Qatar and Oman. New exporters should explore these markets.

India’s Top Onion Producer States

Onion Export Ban decision will affect India’s top onion producing states. Farmers in these states are already unhappy with government’s earlier decisions. This may affect crop production in long term as farmers may opt for other crops, and this may intensify the problem.

Farmers of these states, traders and exporters of Onion are in dilemma about future plans of Onion export. Many people think that new crop will be available in January 2024 and hence government will reconsider this decision.

Conclusion

Like Onion other commodities like Wheat, Rice, Sugar, Soyabean, Toor, Moong, Cotton, Milk are also facing challenges due to import export policies. Uncertain export policies hampering businesses at all level and whole economic cycle is disturbed. Due to Onion export ban, prices have come down by 5-6 Rs/kg on first day itself and this has caused huge losses to farmers, traders and exporters. One section of society cannot be protected by neglecting others, government should consider problems of all including farmers. Government should give sufficient time to traders and exporters to plan their shipments and avoid any losses. Whole country Farmers and exporters are looking forward to Indian Government to clarify on export import policy so that they can plan further.