The Union government has removed the six-month-long ban on onion exports, albeit with the qualification of a minimum export price. The fact that the decision has come just before elections in the onion producing regions of Maharashtra is reason enough to read it with an added layer of political rather than just economic intent.
The pattern in the current export ban and its removal is not limited to onions. Food items account for 39% of India’s food basket and have
The Union government has removed the six-month-long ban on onion exports, albeit with the qualification of a minimum export price. The fact that the decision has come just before elections in the onion producing regions of Maharashtra is reason enough to read it with an added layer of political rather than just economic intent.
The pattern in the current export ban and its removal is not limited to onions. Food items account for 39% of India’s food basket and have been the biggest factor for inflation not meeting the RBI’s target of 4% in the recent past. Because most of India’s food inflation problem is related to climate-inflicted supply shocks rather than demand-driven rallies, the government has been intervening in food markets to manage inflation pressures. These interventions have often taken the form of banning exports, thereby diverting export-driven production from domestic markets.
Is this a prudent strategy to follow in food markets? Free market dogmatists often criticise it on the ideological ground of the government undermining free trade. But no pragmatic government will allow measures that can trigger an inflation problem in the domestic economy. The majority of Indians are net buyers rather than sellers of food. However, farmers, as a class, draw the short end of the straw in both extremes in the market. When prices crash, the government does not come to their rescue. But when they rise, government interventions do not allow them to make any supernormal profits. The worsening climate crisis will make these extreme events the norm rather than the exception for farmers. Clearly, it’s not a fair world for the farmers.
What can be done to remove this in-built policy bias? Unless farmers as a class, across crops and regions, accept reforms and also demand a fair deal from the government, things won’t change. Farmers' organisations and the opposition should introspect why this has not happened. Have they been open to change? Are they making the right demands of governments? And are political parties and governments willing to tolerate some food inflation in the interest of the farmers? These are uncomfortable but pertinent questions that need to be asked — not those about utopian free trade or guaranteed minimum support prices.
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