Govt imposes ban on export of onions

The Union government on Monday banned export of all varieties of onions, anticipating a supply crunch in the coming weeks, as exports surged.

In the April-July period, export of onions rose an unusual 30%, causing prices to show signs of firming up.

A notification by the Directorate General of Foreign Trade (DGFT) on Monday said that exports of onions, which were so far “free”, now stood “prohibited with immediate effect”. A key kitchen staple, onions tend to suffer frequent price and supply volatility.

The government had last banned onion exports on September 29, 2019, after a bad crop crimped output. In December 2019, prices soared to ₹80 per kg in the national capital. The government had lifted the ban on March 15, 2020.

Retail prices this week rose to ₹40 a kg from ₹30 a kg in several cities.

According to official trade data, the country exported US $328 million worth of fresh onions and US$ 112 million worth of dried onions in 2019-20. Between April and July 2020, exports of onions to neighbouring Bangladesh soared 157.7%.

Since the bulb is a common base ingredient of most Indian dishes and widely consumed, consumers are quite sensitive to a rise in onion prices, relative to many other commodities.

The country’s consumer or retail inflation in August rose 6.69%, slightly lower than 6.73% recorded in the previous month, according to government data released on Monday. According to the consumer price index data, food inflation in August fell marginally to 9.05%. Yet, overall food & beverages inflation rose to a high of 8.3% in August, Monday’s data showed.

“Retail inflation in last five months have been in excess of 6%. Unless retail inflation in September 2020 declines sharply to around 4.5%, the retail inflation in three consecutive quarters will exceed 6% and monetary policy committee (of the Reserve Bank) will have to respond to the government on the steps taken to keep inflation in 2-6% range,” said Sunil Kumar Sinha, Principal Economist, India Ratings and Research in a statement. High inflation shrinks the scope of Reserve Bank of India to lower lending rates to boost sagging growth.