India Takes Swift Action With Onion Export Duty to Counter Price Challenges

India Imposes 40% Export Duty on Onions to Tackle Inflation

Responding to escalating domestic onion prices, India’s Finance Ministry has swiftly imposed a 40% export duty. The aim is to stabilize the domestic market by curbing exports and increasing supply.

Effective immediately and lasting until December 31, 2023, the export duty seeks to mitigate the impact of rising onion prices. Onions, along with tomatoes and potatoes, are critical components in the calculation of retail inflation via the Consumer Price Index (CPI) and retail food inflation through the Consumer Food Price Index (CFPI). The surge in vegetable prices has propelled retail inflation to a 14-month high of 7.44% in July. Simultaneously, food inflation has reached an 11.5% peak, marking the highest level in 39 months.

Managing Inflation with Strategic Measures

Scrutinizing inflation data reveals a nuanced trend in onion prices for 2023. Initially in the negative zone for the first five months, onion prices transitioned into positive territory, culminating in an inflation rate of 11.7% by July. In response to this inflationary trend, the government has implemented various measures, including the imposition of export duties.

Previously, the Consumer Affairs Department made a pivotal decision to release onion stocks from the newly created buffer of 0.3 million metric tonnes for the year. The move followed a meeting led by Consumer Affairs Secretary Rohit Kumar Singh with the Managing Directors of the National Agricultural Cooperative Marketing Federation of India (NAFED) and the National Cooperative Consumers’ Federation (NCCF) on August 10. The targeted release will focus on markets where retail prices exceed the national average and where the rate of price increases surpasses defined thresholds.

Fostering Stability in Onion Supply

The Ministry also signaled a willingness to increase buffer procurement if necessary. During June and July, NAFED and NCCF procured 1.50 million metric tonnes each of rabi onions from Maharashtra and Madhya Pradesh. A collaboration with the Bhabha Atomic Research Centre (BARC) also saw about 1,000 metric tonnes of onions undergo irradiation and controlled atmosphere storage to minimize losses.

To alleviate onion price volatility, the Government has consistently maintained an onion buffer via the Price Stabilization Fund. These annual buffers, sourced from rabi harvests, are gradually released in key consumption centres during periods of reduced supply. Notably, the onion buffer’s size tripled over the past four years, expanding from 0.1 million metric tonnes in 2020-21 to 0.3 million metric tonnes in 2023-24. This strategic move has ensured affordable onion availability, reinforcing price stability—a facet underscored by the Ministry’s official statement.

“Instituting a timely export duty on onions, India works to stabilize domestic markets and manage inflation effectively.  Procurement can be made at this point of time.”

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