With onion prices experiencing a decline of 30-40% since late February, the Indian government has removed the 20% export duty on onions effective April 1. This duty has been in place since September 13, 2024. An official statement highlighted the government's aim to balance remunerative prices for farmers with consumer affordability, as both mandi and retail prices have softened due to the expected arrival of rabi crops in substantial quantities.
Despite the export restrictions, India managed to export approximately 1.71 million tons of onions in FY24, with around 1.16 million tons exported by March 18 in FY25. According to the Department of Agriculture, the rabi onion production is estimated at 22.7 million tons this year, marking an 18% increase from the previous year's 19.2 million tons. The rabi onion, which constitutes 70-75% of India's total onion production, plays a key role in ensuring price stability until the kharif crop arrives in October and November.
The anticipated higher production is expected to further ease market prices in the coming months. In Nashik, a primary production hub, and in consumer markets like Delhi, onion prices have dropped 30-40% since late February. This decline is attributed to an increased domestic supply of new rabi crops from Madhya Pradesh, Maharashtra, and Gujarat, along with continued export restrictions.
The 20% export duty had made Indian onions less competitive globally, particularly against Pakistani onions. Data indicates that in November 2024, India exported onions worth $52.79 million, nearly 47% less than the same month the previous year. From April to December 2024, India exported onions valued at $392 million, with the total for FY24 reaching approximately $500 million. Bangladesh accounted for nearly 48% of these exports, followed by Malaysia.
Export restrictions on onions have been in place since December 2023, with a brief ban lifted in May 2024, replaced by a Minimum Export Price of $550 per tonne and a 40% export tax. Although the MEP was lifted in September 2024, the export duty was only reduced to 20% until its recent removal. A senior industry official noted, "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."
India produces approximately 28-30 million tons of onions annually, making it one of the world's largest producers. The crop is grown in three cycles: kharif, late kharif, and rabi, with rabi onions contributing about 75% of total annual production. The perishable nature of onions and the production gap between rabi and kharif crops lead to price fluctuations, typically rising from September to December and falling thereafter.
Source: Business Standard