India is spicing things up with a 40% export duty on onions. What’s the scoop behind this savoury move?
Tomato prices increased to Rs 200 per KG in the past few weeks. They had nearly disappeared from people’s kitchens. Not just tomatoes but the prices of other vegetables and spices have also gone up considerably. Due to this situation, the Government of India has made another important decision.
On August 19, 2023, the government announced that it would charge a tax on exporting onions. Now, there are various questions arising from this move. For instance, what are the reasons behind the government’s choice? Will onion prices follow the same upward trend as tomatoes? There have also been protests by farmers in many places.
In this article, we will find answers to all of these questions.
Let’s begin.
What’s Happening?
The Finance Ministry announced on 19th August 2023 that there is now a 40% tax on exporting onions, which will be in effect until 31st December 2023. This change is also impacting onion prices. The consumer affairs price monitoring department reported that the average retail price of onions was around Rs 27 per kg just a month ago, but now it’s closer to Rs 31. In some places, prices have even increased by Rs 20.
Following the tomato price situation, the market has had a significant talk about onion prices. Speculations were that onion prices would start rising from September onwards, causing difficulties for regular people. Traders mentioned that the country has an ample onion supply. Still due to this year’s delayed monsoon, there is a higher amount of poor-quality onions in stock, which could lead to an increase in the price of good-quality onions. Considering this concern, it was anticipated that the government might take steps to prohibit onion exports.
To begin with, let’s understand what export duty means. Export duty is a form of tax imposed on goods that are exported to another country. Its purpose is to safeguard the economic interests and fair trade practices of the nation.
Reason For Imposing Export Duty
Consumer Affairs Secretary Rohit Kumar Singh stated that this decision had been made to ensure enough onions are available in the local market and to prevent prices from rising during the upcoming festive season.
As reported by DNA newspaper, India is a significant onion exporter, which has led to higher prices of this vegetable within the country. The imposition of export duty on onions is a step aimed at restricting the global export of this vital commodity.
Over the past two years, onion prices in India have experienced a decrease. Limiting onion exports will assist in managing the inflation associated with onions within the country. Furthermore, the central government is actively working to boost domestic onion supply nationwide, addressing challenges arising from unpredictable weather conditions.
Will Farmers Be Harmed?
In many places, farmers have opposed the government’s decision. They say they are already having a hard time because of natural disasters, and putting a tax on exporting onions will make it even harder for them to make a profit from their produce.
But according to a report from Mint, Union Minister Bharti Pawar explained that the government decided on this tax to make sure there is a balance between the demand and supply. Also, a group called the National Agricultural Cooperative Marketing Federation of India Limited (NAFED) has been told to get an extra two lakh tonnes of onions to keep as backup.
What’s Next?
Inflation began going up again after May because the prices of tomatoes, vegetables, and spices went higher. In July, retail inflation went over 7% after many months. At the same time, the Reserve Bank predicts that retail inflation might be more than 6% from July to September.
However, after reaching Rs 200-300 per kg, tomato prices are now starting to decrease. When it comes to onions, the government has also started giving onions to some places from its backup stock. Where onion prices will go now is a huge question. Whether the government’s strategy will work or not, only time will tell.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
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