Strong decision by the world's largest onion exporter

The Indian government on August 19 decided to impose a 40% tax on onion exports until December 31 this year, the country's Finance Ministry said.

This is India's latest move to curb prices of key agricultural products amid sharp increases in prices due to supply problems.

Data released on August 14 showed India's headline retail inflation rose to 7.44% in July, its highest in 15 months, due to a spike in tomato prices. Experts fear that onion prices will rise to a similar level.

The new tax will help New Delhi reduce prices in the domestic market, but Asian buyers will have to pay more for the product, as India is the world's largest onion exporter, while other exporters in the region have limited supplies.

India's onion exports in the first half of 2023 rose 63% from a year ago to 1.46 million tonnes. Countries like Bangladesh, Nepal, Malaysia, the United Arab Emirates and Sri Lanka depend on Indian onions.

It is an ingredient in traditional dishes across Asia such as biryani in Pakistan and India, belacan in Malaysia and fish curry in Bangladesh.

World - Strong decision of the world's largest onion exporter — A sudden shortage of supply caused tomato prices in India to rise by as much as 1,500% in July. Photo: Al Jazeera

The decision was taken to increase the supply of onions in the domestic market amid fears that prices of the commodity would rise sharply ahead of the festive season, a senior Indian government official said.

The export tax will make Indian onions more expensive than those from Pakistan, China and Egypt, which will naturally lead to lower exports and lower prices in the domestic market, said Ajit Shah, a trader in Mumbai.

Wholesale onion prices in key Indian markets rose nearly 20% from July to August to around 2.4 rupees ($2.6) per kg on concerns that erratic rainfall will lead to lower output.

Indian traders said that although onion production was adequate, heavy rains and floods had damaged a significant amount of onion stocks in Maharashtra and Karnataka, the main suppliers.

“Onions harvested in the summer months are rotting fast and new supplies are slow. This situation has forced the government to take precautionary measures,” said another Mumbai-based trader.

India said on August 18 it would release onion reserves to ensure prices remain under control until the new crop season begins from October onwards.

The South Asian country has also decided to stockpile 3,000 tonnes of onions for the 2023-24 crop year to meet emergencies and stabilize prices during supply shortages. In 2022-23, the country has 2,510 tonnes of onion stock .

Nguyen Tuyet (According to Reuters, NDTV, Money Control)

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