Govt slashes export duty on onion to 20%

Workers sort onions at the APMC Market in Solapur, Maharashtra
| Photo Credit: PTI

Almost ten months after it prohibited onion exports, the Centre on Friday (September 13, 2024) scrapped the Minimum Export Price (MEP) mandate of $550 per metric tonne and halved the 40% export duty imposed on onion shipments in May. The change in stance comes ahead of assembly elections in Maharashtra, the country’s largest onion producer.

The government had banned the export of the politically sensitive kitchen staple last December, fearing domestic shortages after a weak monsoon. In March, the ban was extended till further orders, even as some shipments were allowed based on diplomatic requests from some countries. 

Onion farmers had turned restive as these extended curbs coincided with high global prices and demand. In May, ahead of the Lok Sabha polls in Maharashtra’s onion farming hubs, onion exports were moved back from the ‘prohibited’ to ‘free’ category, albeit with the conditions of a 40% export duty and an MEP of $550 per tonne.

On Friday, the Commerce Ministry notified the removal of the MEP condition, within hours of which the Finance Ministry issued a diktat slashing the export duty on onions to 20% from 40%. The lifting of the curbs comes despite a steep uptick in onion prices for Indian consumers in recent months – wholesale prices were up 88.8% in July, while retail prices are reckoned to have risen over 50% in August.

A similar MEP imposed on Basmati rice exports last October, of $950 per tonne, was also scrapped through a separate order issued by the Department of Commerce. However, the order, also issued on Friday, mandates the Agricultural and Processed Food Products Export Development Authority (APEDA) to closely monitor export contracts “for any non realistic prices” for Basmati rice exports.

Meanwhile, another December 2023 decision aimed at checking inflation – permitting duty-free imports of yellow peas with no conditions attached – has been extended for the fourth time from its current October 31 sunset date, till December 31, 2024. This may have been driven by the latest Consumer Price Index (CPI) data for August, with pulses inflation coming in at 13.6% — above the 10% mark for the 15th month in a row.