India's export embargo sends onion prices soaring to Tk220 per kg

• India bans onion exports until 31 March next year
• Daily onion demand in Bangladesh is 7,600 tonnes 
• Bangladesh produced 34 lakh tonnes in FY23
• 85% is met with local production

The price of onions in Bangladesh has nearly doubled overnight and keeps rising by the hour following news of India's extension of its export embargo on the essential commodity. 

On Saturday morning, local onions were being sold at Tk220 per kg in the capital, witnessing a surge from Tk140 the previous day. Meanwhile, imported and Indian onions rose to Tk200, up from Friday's range of Tk120-140. 

With an annual onion demand of around 7,600 tonnes daily (28 lakh tonnes annually) in the country, this abrupt Tk80-90 jump within a day translates to Tk60.80 crore in additional income for onion traders, including importers, wholesalers and retailers. 

However, authorities assert that the currently available onions are either domestically produced or arrived in the country before India imposed its export ban. 

AHM Shafiquzzaman, director general of the Directorate of National Consumers' Right Protection (DNCRP), said, "There is no justifiable reason for an overnight price surge and excessive profit margins. Operations are underway nationwide to restore prices to previous levels."

The directorate on Saturday conducted operations in districts and imposed fines of Tk6.66 lakh on 133 businesses for inflating onion prices. The agency will continue its operations today.

Shariful Islam, a vegetable seller on Dilu Road in the city, shared his experience with TBS. He noted that despite typically purchasing 50kg-100kg of onions daily from the wholesale market, on Saturday he could only buy 15 kg due to the hiked prices.

"Domestic onions are now priced at Tk220, and Indian ones at Tk200, even though I sold them at Tk140 just the day before," he added.

Meanwhile, at the wholesale level, domestic onions were priced at Tk190-195 per kg, and imported ones at Tk180. At the Hili land port, onions, which were sold for Tk90 on Friday morning, saw a jump to Tk180 on Saturday.

Ashraful, a wholesaler at Karwan Bazar in Dhaka, told The Business Standard, "We have received information about a crisis in Faridpur and Pabna, our usual onion sources. The prices they are quoting are high, and consequently, we are compelled to sell at an elevated rate."

Comparing prices listed on the Trading Corporation of Bangladesh, the current price of domestic onions is 311% higher than in the same period last year while the price of imported onions is 267% higher.

On Thursday, India's Directorate General of Foreign Trade imposed a ban on onion exports until 31 March next year. Earlier, on 28 October, India introduced a minimum export price of $800 per tonne for onion exports, effective until 31 December. However, the country decided to halt exports before the expiry of this restriction.

Import and production scenario

Bangladesh imported 7.05 lakh tonnes of onions from 5 June to 7 December, against the approved 19.90 lakh tonnes, according to sources at the Department of Agricultural Extension. 

In FY23, onion imports stood at 7.43 lakh tonnes, while the figures were 6.65 lakh tonnes in FY22, 5.53 lakh tonnes in FY21, and 5.71 lakh tonnes in 2019-20. 

According to the Ministry of Agriculture, 34 lakh tonnes of onions are locally produced annually, with postharvest losses accounting for 25% or more. Ministry of Commerce data indicate that 85% of demand is met domestically, with the remainder reliant on imports, suggesting no imminent shortage.

The government in August decided to allow the import of onions from nine other countries in addition to India to curb rising prices. At the time, onion imports were allowed from China, Egypt, Pakistan, Qatar, Turkey, Myanmar, Thailand, Netherlands and the United Arab Emirates. 

Initially, a few permits were taken to import from various countries, but later the traders did not show much interest. 

Challenges such as the dollar exchange rate and a crisis deterred traders from importing onions, resulting in minimal quantities from alternative countries.

During this period (September-November), only 1,938 tonnes of onions were imported. Of this, 1,102 tonnes came from Pakistan and 836 tonnes from China.

Jinnat Ali of JM Trading in Chattogram cited difficulty in obtaining bank approval and the high dollar exchange rate, making importing from alternative countries financially unviable. 

He expressed concern about potential losses if India lifts the ban, as consumers prefer domestic and Indian onions over those from China, Pakistan, Myanmar and Turkey.

Spike in Chattogram 

The port city's onion market mirrors Dhaka's instability, with Indian onions priced at Tk200-220 per kg in the wholesale market of Khatunganj after the export ban announcement. The prices were Tk95-96 a day before.

The supply shortage, stemming from India's restrictive tariff since August, has led to sustained prices above Tk90 in the wholesale onion market.

Trade leader Idris Mia at Khatunganj market noted a decline in onion supply following India's imposition of restrictive tariffs in August. 

"The wholesale onion market has consistently remained above Tk90 due to increased import costs. Despite some imports from China and Pakistan, the quantities have been insufficient to meet demand," he added.

Officials of the agriculture department look to another 10-15 days for early varieties of onions to mature, while onions with leaves are being sold in various Dhaka markets. They hope increased onion availability will bring prices down to more manageable levels.