Decision to partially lift the ban on onion exports
Nearly six months after the Centre prohibited onion exports citing runaway prices and supply concerns, it put them back in the ‘free’ category, with the caveat of a minimum export price of $550 a tonne, and a 40% levy on top.
This marked the second significant policy change on onion exports over a span of 10 days.
On April 25, 2,000 tonnes of white onion exports were permitted, if certified by the Gujarat Horticulture Commissioner.
Coming days before Gujarat’s Lok Sabha vote, the move triggered an outcry about preferential treatment from the neighbouring State’s farmers.
In a press release, the Centre explained that “purely export oriented” white onions entail higher production costs, and nearly one lakh tonne of onion exports had also been allowed that would help Maharashtra, the country’s largest onion producer.
This did not cut much ice — only a few thousand tonnes of onions had actually been shipped under that export window.
Reasons
It is no surprise that this conditional freeing up of exports comes just before Maharashtra’s onion farming hubs vote on May 20.
Justifying the move, the Centre pointed to mandi prices stabilising at ₹15 a kilo since April, a fresh assessment that supplies are, in fact, adequate, and an assertion that the politically charged vegetable is perishable.
State BJP leaders proclaimed this will ensure farmers get better prices and income.
It is unclear if that will fructify — the floor price plus export duty formulation means exports are viable only at or over an estimated ₹64 a kilo.
Impacts
International onion prices have been easing after Egypt and Pakistan recently lifted their export curbs, much before India.
With the latest norms expected to last at least till the next government takes charge, onion farmers will effectively face export curbs for almost a year, starting from last August when a 40% export duty was levied.
Before food inflation spiked in the second half of 2023, onion prices had been falling for as many as 21 months till May.
They rose about 30% through 2023-24, but from a 21% decline in the previous year.
A Centre for Civil Society study reckoned that the average farmer lost 21% of annual income due to onion export bans between January 2015 and March 2020.
Way forward
If anything, the current streak of curbs after nearly two years of falling prices, does not send out a positive sowing signal for farmers.
And that is neither good for curbing inflation nor meeting India’s aspirations to be the world’s food supplier.
Straddling the ‘consumer versus farmer’ dilemma is tricky, but some longer term context can guide policy making towards a nuanced rather than a knee-jerk approach.
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