Indian Government Reacts in an Effort to Ease Onion Prices

Published 2023년 3월 14일

Due to falling onion prices in India, the government has intervened by strategically purchasing red onion crops to relieve pressure on the domestic market. The increased import duty from Bangladesh, a significant importer of onions from India, has also added to the price crash. Red onion prices are in a downward trend, dropping 34% MoM to USD 0.11/kg in W1 of March. Short-term price movements will be determined by government intervention.

The wholesale price of red onion in India dropped 34.29% MoM to USD 0.11/kg in W1 of March 2023, based on Tridge data. As a result of falling onion prices in India, the government has reacted with the strategic purchase of red onion crops to ease pressure on the domestic market. In February, farmers from the Maharashtra region protested when the auction prices fell below production cost and could barely cover transportation costs to auction markets for some.

Seasonality of Fresh Onion in India

Source: Tridge

The onion season runs from November to May, while the central producing regions are Maharashtra, Karnataka, Madhya Pradesh, Gujarat, and Bihar. Onion production in India is highly dependent on the monsoon season, as it is a water-intensive crop. Unfortunately, since there are two main onion seasons in India (summer and winter sowings), due to overlapping supplies of onions, and thanks to higher temperatures which shortened the season and affected the quality of the crop, the perfect storm for price drop was created.

Top Tradeflows of Indian Onions

Source: Tridge

Another point that has added wind to the sails of the price crash was the increased import duty from Bangladesh, a significant importer of onions from India. Bangladesh started imposing an import duty on onions from India at INR 3/kg (USD 0.036/kg), significantly decreasing imports. India represents a top-tier country regarding onion exports, while around one-third of total export goes to Bangladesh. In 2022, from April to December, the value of exported onions from India was USD 523.8M, an 16.3% YoY increase. For FY 2022, Bangladesh imported 664,772 MT of onions, a vast majority (94%) coming from India. As this wasn’t troubling enough for farmers, rumors about the export ban of onions from India appeared. The government quickly reacted with statements, clarifying that there is no restriction on the export of onions, which would be a paradox given the shortages of onions globally. More on previous onion analysis: Rising Prices and Export Bans in India: Is it That Time of the Year Again?

Source: Tridge

The negative trend of wholesale prices of red onions in India, which stood at USD 0.11/kg in W1 of March 2023, will depend on further government intervention. Expectations are that the pressure on the price will continue in the following weeks until government purchases kick in. The first batches of April onions, usually of higher quality and better shelf life than the winter ones, will be a game-changer for Indian farmers.