Onion farmers seethe; seek floor price to calculate export duty

Even as the onion trade continues to rally against the 40% export duty to increase supply of the essential crop in the domestic markets to tame rising prices, onion grower associations said that the government must announce a floor price to enforce the export tariff.

The Economic Times has reported that Horticulture Produce Exporters Association (HPEA) has even shot off a letter to the government urging it to announce a floor price, the absence of which, it thinks, could lead to unfair advantage to certain stakeholders and ports. The main thrust of the argument is to ensure fair play in the export theatre.

“It is necessary to determine a floor price for calculating the export duty on onions across different land and sea ports. We fear that there may be a disparity in the floor prices being considered for the calculation of export duty on onions across different ports,” read the letter written by Ajit Shah, president of HPEA.

The Centre has imposed a 40% export tax following the sharp rise of onions in retail prices in different parts of the country in the past few weeks.

On the other hand, the announcement of the export duty has led to a drop in onion prices, leading to angry protests in Maharashtra, the onion capital of India. Onion traders in the onion-producing region Nashik downed shutters in wholesale market to protest against the administrative decision.

The protests quickly took a political turn with onion farmers urging the people to vote against the BJP in the general elections.

“Onion farmers had been incurring losses for the entire last year due to subdued prices. Many of them haven’t yet received the subsidy amount that the government had announced to compensate for their losses,” said Jayadatta Holkar, director of Mumbai APMC.

The Centre announced the export duty on August 19 to avoid further spiralling of prices.

The government is already wary of vegetable prices raising retail inflation far beyond the RBI’s tolerance level of 6%, when vegetable prices were found to be contributing 200 basis points to the 7.44% score in July – a sharp rise from 4.81% in June.

On another front, export curbs on rice, wheat and onion are leading to inventory pile-ups and revenues losses for businesses. Non-basmati rice exports can under a sudden ban on July 20 and this has led to rice stocks piling up in different ports. This ban was prompted after rice prices rose more than 30% between October 2022 and July 2023.

The country banned wheat exports in May 2022.