September 15, 2020 10:59:58 am
A worker carries a sack of onions at the APMC market in Ahmedabad on September 7, 2020 (Express photo: Nirmal Harindran).
On Monday, a shocked central government issued a notification ban the export of onions even when the average commercial price of the light bulb crossed the psychological barrier of Rs 30 per kg in the Lasalgaon Wholesale Market of Maharashtra. This ban came nearly three months after the government led by Narendra Modi amended the archaic Essential Products Act of 1955 to make the imposition of stock limits and movement restrictions on food grains, edible oilseeds, potatoes, onions and other essential products will only apply in extreme cases. conditions like war or natural calamity. The export ban comes even as the central government works to make the ordinance law.
A look at the export ban and its possible repercussions in the coming days.
What were the triggers that led to the export ban?
There appear to be two main triggers that led the government to take the extreme step of banning exports of all types of onions. The first was, obviously, the steady increase in wholesale prices for onions, which has made the kitchen staple more expensive in urban markets. Between March and September, the average price of the bulb in the Lasalgaon market has appreciated almost 100%. Prices in the Nashik district’s Niphad taluka markets, which were in the range of Rs 1,500 per quintal in March, have since appreciated to Rs 3,000. On the retail markets, onion is now priced at Rs 35-40 per kg compared to Rs 25-30 per kg in June.
The immediate trigger that led to the ban can also be found in the numbers of the Consumer Price Index (CPI) released by the Ministry of Statistics and Program Implementation (MoSPI) on Monday. The figures, which measure inflation, were 6.69 percent slightly lower than last month’s 6.73, but well above the Reserve Bank of India’s (RBI) target of 6 percent. The Consumer Food Price Index (CFPI) for August was 9.05 compared to 9.27 last month.
At the policy level, the high CFPI and the rising onion price were sufficient triggers to get an onion export ban at a time when farmers were unloading their stored onions.
Also in Explained | Eggs or not: why Madhya Pradesh is debating Anganwadi meals again
Why are onions more expensive in wholesale markets?
The answer to this question can be found in the exceptionally heavy rains that hit the country in August. These rains have caused the almost complete disappearance of the almost market-ready onion crop in Karnataka, which was due to hit the markets in early September. Along with this, the rains have also wreaked havoc on onions stored in Madhya Pradesh, Gujarat, and parts of Maharashtra. Currently, only Maharashtra onion growers have stored the products they harvested in March-April. The supply disruption is likely to continue until the new crop in Maharashtra hits the markets in early November.
If the domestic supply and demand situation was strongly leaning towards the latter, the demand for Indian onion was also increasing in international markets. Indian onions, which are normally shipped to Gulf countries, Sri Lanka and Bangladesh, are in constant demand throughout the year. However, exporters say that demand from Sri Lanka has picked up suddenly, as the island nation has also reported extensive destruction of its crops due to the rains. The cost of landing Indian onions at Dubai port at the moment is around Rs 32-35 per kg, which has led many exporters to increase their shipments from Nashik.
📣 Express explained is now in Telegram. Click here to join our channel (@ieexplained) and stay up to date with the latest
So will the export ban lower onion prices?
Once markets open for trade on Tuesday, a sharp depreciation in prices is expected in light of the export ban. However, traders believe that prices will rise again in a week or so as overall supplies remain stressed. The new crop, they say, will come only after November and with demand expected to increase before the festive Dussehra season begins, prices will remain bullish.
Will the ban on the export of onions have political consequences?
The political decline in high onion prices can hardly be overstated. Given that Bihar’s elections are likely to take place later this year, it appears that the government was wary of reaching out to the electorate when the staple of the kitchen was more expensive than usual.
Ironically, the export ban comes as the government plans to enact the ordinances that amended the Essential Products Law and stop knee-jerk reactions like imposing stock limits. Farmers’ organizations were quick to denounce “double standards” by the government. Since Tuesday, Shetkari Sanghtana, the farmers union started by legendary farmer leader Sharad Joshi, has started protests against this measure.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines
For the latest news explained, download the Indian Express app.
© The Indian Express (P) Ltd
.
