India's onion farmers in distress after government imposes 40% export duty

The country is one of the leading onion exporters in the world, with the UAE being a major destination

An onion trader in Thane, India. Getty Images

Onion growers in India are in an uproar over the government’s decision to impose a 40 per cent export duty on the vegetable.

There are fears the move will cause a glut and slump in domestic prices.

Last weekend, Prime Minister Narendra Modi’s government announced that the new tax would be imposed until December, with the aim of stabilising the domestic supply of onions and curbing inflation.

The move comes amid a national outcry over the price of tomatoes, which were selling for 250 rupees ($3) – more than 10 times their usual price.

The government said it would also offload stocks of onions, a staple in Indian kitchens, in wholesale markets to reduce retail prices, but farmers and onion traders say the move will affect the chance of getting a good price for their harvest.

Across the western state of Maharashtra, India’s largest onion-growing region that accounts for 30 per cent of production, farmers have been staging protests and closing down wholesale markets.

“Because of the tax, the exporters will not send onions and if it is not exported, onions will remain within the country causing a surplus and ultimately its rate will drop. Farmers are angry with this decision,” Sampat Sakore, a farmer from Shirur in Pune, told The National.

Dushyant Pawar grows about 200 quintals (20,000kg) of onions on half a hectare of land in Maharashtra's Nasik district. He said he sells three quarters of his produce on the wholesale market and will face huge losses because of the export duty.

“The expenditure of growing onions is roughly 1,500 rupees ($18) per quintal … the prices of pesticides and fertiliser have increased and so have labour charges. On top of that, the government has imposed a 40 per cent tax on exports, putting further stress on its prices,” Mr Pawar told The National.

“Onions should have been sold for at least 40 rupees [48 cents] per kg but they are selling at 20-25 rupees [25-30 cents].

“I had some 50-60 quintals of onions in stock. I was hoping to sell it and use the money for my children’s school fees but now that the prices have dropped, I’ll face a loss of up to 35,000 rupees [$423].”

At Asia's largest onion market in Lasalgaon in Nasik, traders have stopped trading the bulb indefinitely until the government's decision is rescinded, as they claim that onion prices have dropped from 26 rupees per kilogram last week to 18 rupees to 22 rupees now.

India is one of the leading onion exporters in the world, with Bangladesh, Malaysia and the UAE among the major destinations.

It has exported 975,000 tonnes of onions in the current financial year, according to the Ministry of Commerce.

“They took the decision in the 11th hour. There was no need to impose the tax because the rates were already stable in the market,” Manoj Kumar, an onion trader and exporter in Lasalgaon, told The National.

“There was no panic because onions were being sold for a maximum of 30 rupees at wholesale prices across the country. They could have put a restriction on the number of containers for export rather than putting a blanket tax.”

Mr Kumar, who runs a 50-year-old onion export and trading business, said that such restrictions would affect the business as it would create market uncertainty.

“Our onion has a geographical indication tag. If there is market uncertainty, importers will not trust the buyers. If the government puts such hurdles, it will become difficult for us to do business,” he said.

“India is not the only country; there is China, Pakistan, among other exporters.”

Growing farmer anger

To pacify the farmers and traders, Piyush Goyal, Food and Consumer Affairs Minister, on Tuesday said that the government would buy 200,000 metric tonnes of onion at 2,410 rupees ($29) a quintal from different centres in Maharashtra.

He said the “historic” decision was taken in the interest of farmers and consumers, and ensures a balance between these interests.

“Both consumers and farmers are valuable to us. Our food giver gets a good price. I invite all the farmers to sell their onions at good prices and they don't need to worry about anything,” Mr Goyal said.

But farmers such as Mr Pawar doubt the government’s assurance over claims that state agencies do not purchase stocks as promised and force them to sell the produce in the open market at lower prices.

Farmers can only sell their produce to Agricultural Produce Market Committees – state-approved marketing boards that ensure that farmers are protected from market price fluctuations and big private traders.

They sell to APMCs through agents, and from there, the traders sell the crops and vegetables to exporters at wholesale prices.

APMCs are one of the leading agricultural produce procurement agencies in the country.

“Although the government has promised to procure 200,000 metric tonnes of onions at around 2,400 rupees, the agencies do not follow the rules and they procure only a fraction of the targeted quota,” Mr Pawar said.

“But at the same time, they will show in government records that they procured the full stocks. We are later forced to sell to private traders at lower rates.”