‘If We Had Not Intervened, Onion Prices Would Have Touched Rs 100/ Kg on Nov 30’: Govt on Export Ban

Defending the government move to ban onion exports, Consumer Affairs Secretary Rohit Singh told News18 that the Centre had to intervene and fix the minimum export price (MEP) to $800 as data showed an upward trend.

Markets in Bangladesh, Nepal, Bhutan, Sri Lanka and the Maldvies have reported steep price hikes in the wake of the ban till March 31, 2024 announced by the Directorate General of Foreign Trade (DGFT) on December 8.

India had introduced an MEP of $800 per tonne on onion exports on October 28 this year.

Singh denied that the export ban would lead to the interests of farmers being compromised. “We continue to procure onions from farmers. In fact, we have asked both the agencies (NAFED and NCCF) to be more aggressive. However, procurement is at a slow pace as Kharif arrival is slow”.

The onion buffer has a sanction of 7 Lakh Metric Tonne (LMT), of which, a little over 5 LMT has already been procured. Out of the 5 LMT buffer, around 3 LMT have already been disposed of in wholesale as well as retail markets to cool inflationary trends. However, the consumer affairs secretary said “if there is a need, the group of ministers can give the go ahead to procure more. This figure (1 LMT buffer) should not deter you because we are buying more and more (onions). In fact, the minister has directed that you should buy more (onions) aggressively”.

Opposition leaders, including NCP chief Sharad Pawar, and farmers’ groups in Maharashtra have protested the export ban of onions by stopping auctions in Nashik and blocking the Mumbai-Agra highway. “The opposition is not genuine. Consumer is getting benefitted. Out of 140 crore consumers, many are in Maharashtra. Farmer is not getting affected. We have said whatever you bring to the market, subject to quality condition, it will be procured. The only one who is getting affected is the one who is buying at a low price from the farmer and selling at a higher price in Bangladesh. The trader or the exporter, who was making a killing because of the price difference between Lasalgaon and the Bangladeshi market, is getting affected, and he should be because for us (government), the domestic consumer and farmer are the most important factors,” the consumer secretary argued,” the consumer secretary argued.

He also rubbished the questions regarding delay in government decisions. “If we had not taken steps on time, the prices would have touched Rs 100 on November 30. We were told by analysts, who came to our office three weeks ago, that the prices will not touch Rs 100.”

The onion buffer with the government that was initially 3 LMT this year and subsequently raised to 5 LMT and is now 7 LMT was a crucial factor in stabilising the prices of commonly used kitchen staple, even though, it is still above Rs 50 per kg.

“We have realised, as supported by data, that if you have good buffer, it sends a signal to the market, unless there is heavy pressure on demand vis à vis supply, then the government can intervene. In 2019, we did not have the buffer — it was 50,000 MT or something — so the trader took advantage and the prices went really high. But now, with high buffer, these spikes have gone down. This year, our assumption is that if the buffer was low, this would have reached Rs 100. The quantum of buffer is inversely proportional to the price rise, specially, the possibility of traders taking advantage of the situation, which in perishable commodities is very likely. By having the buffer, the government sends the signal that you cannot take undue advantage and we will intervene if required the government used its buffer to release the stocks in both wholesale and retail markets where the prices showed an upward trend. It disposed 2,70,680 LMT of onions in wholesale markets, and more than 2 crore kg in retail markets where it supplied 2 kg at Rs 25/ per kg per family in 213 cities through 2,139 retail outlets. “We have benefited 1 crore families over the past 45 to 55 days. Impact was that prices started showing a declining trend from November 8 to December 8. This is all India average. It is coming down. Today, it is almost Rs 56.”

The other important factor to understand is the method of looking at price trends, which have risen from 178 to 1,700 data points. “Countries, which are big producers of onions banned the export. So, the requirement for export from India suddenly shot up. Hailstorm affected the crop,” Singh cited the export ban of Egypt and Turkey among other countries as one of the reasons for the high demand for India’s onions abroad.

According to the government, the reasons for a sharp upward trend in onion prices this year were robust Rabi stocks, speculations of a poor Kharif production due to untimely heavy rains and unforeseen dry spells, and delay in arrivals of Kharif onions due to delay in sowing. By the end of November and beginning of December, when the Rabi onion stocks start depleting and the Kharif is yet to arrive, the $800 MEP was no deterrent for exports. Singh said, “We put a MEP of $800. The price was determined because of the prevailing price in Bangladesh. Most of our stuff goes to Bangladesh and neighbouring countries. Then we started retail intervention of selling Rs 25 a kg through 3,000 outlets. That started working out.”

So far, the government has spent around Rs 600 core in procuring onions for the buffer to prevent the crashing of wholesale prices so that farmers’ interests are not compromised.

The government procures less than 3% of the total onion production. “It is just messaging that if you don’t behave, we have stuff to intervene. We don’t buy 25%. We cannot buy 25%,” Singh said.

The estimated production of onions during 2022-23 was around 318 LMT, surpassing last year’s production of 316.98 LMT.