Indian onions are losing their competitiveness in the global market, particularly the Gulf, because of the 20 per cent export duty imposed by the government currently.
The Centre imposed a 40 per cent export duty on onions in May 2024 but reduced it to 20 per cent in September. According to traders and industry participants, the export duty is forcing buyers to look at other origins, besides affecting returns to growers.
CT Munshid, Secretary of Kerala Exporters Forum, said many exporters from Kerala despatch onions to Gulf markets after procuring them from Nashik in Maharashtra. However, the export duty has made Indian onions lose their competitive edge.
Losses all around
“Importers in the Gulf markets are sourcing onion from other competitors such as Pakistan, Egypt, Turkey and Iran,” he said.
“Our prices are $350 a tonne and Pakistan is offering onions at $280. The 20 per cent duty is making it difficult for Indian onions in the global market,” said Ajit Shah, President, Horticulture Produce Exporters Association. (HPEA).
“We are losing out as a result not only in the Gulf market but in other markets, too,” said M Madan Prakash, Director of Rajathi Group that exports agri-produce.
“This year, onion production is high. The export duty is affecting our onions competitiveness and farmers are not getting good returns. Our production is high as apart from Maharashtra, Madhya Pradesh, Rajasthan, Karnataka and Tamil Nadu have a good crop,” said Suvarna Jagtap, Director at Lasalgaon Agricultural Produce Marketing Committee (APMC), Asia’s largest onion market.
Output estimate
Shah said production is about 30 per cent higher than last year. In its first advance estimate of horticultural crops, the Ministry of Agriculture and Farmers’ Welfare pegged onion production at 28.88 million tonnes (mt) during the current crop year to June compared with 24.27 mt a year ago. It is lower than the 2022-23 output of 30.21 mt.
Currently, the modal price (the rate at which most trades take place) of onion is ₹1,525 a quintal, while for the red variety, it is ₹1,570. During the same period a year ago, the modal price was ₹1,420 and ₹1,351, respectively. Prices are down ₹350 from a week ago.
“Farmers have begun to bring out their stored kharif onions. So, prices are low,” said Jagtap.
India is losing out to Pakistan also because the latter’s rupee has plunged against the dollar and freight rates from Karachi are low as shippers prefer to load containers at a discount rather than return them empty.
Buyers’ indication
“We are losing out to countries such as Turkey, Iran and Egypt,” said Prakash.
“Earlier, buyers will hesitate to touch other consignments. But because of our duty and other curbs over the past 4-5 years, other countries have made inroads into our markets,” said HPEA’s Shah.
Pakistan, Sudan, China and Holland onions have made inroads into Indian traditional markets, he said.
The Gulf market normally prefers Indian onions because of their pungency. Many buyers have indicated their decision to Kerala exporters that they have stopped procuring the Indian produce. The demand reduction has led to a decline in ocean freight as well, Munshid said, adding the government should withdraw this.
‘Levy must go’
The Kerala exporters’ forum is planning to raise the issues at the joint meeting convened by the Directorate-General of Foreign Trade and the government sometime next week, he said.
Traders said the onion export ban in December 2023 and the imposition of high export duty on the crop generated discontent among onion farmers before the Lok Sabha elections. It was during the Maharashtra elections, the government brought down the export duty to 20 per cent, they said.
Shah said the duty on onions should go and expected it to be scrapped soon.