India eases onion export restrictions, reduces export duty to 20%

India has eased onion export restrictions by removing the $550 per tonne minimum export price and cutting the duty from 40% to 20%.

The Indian government on Friday scrapped the minimum export prices (MEPs) on onion and Basmati it had imposed last year to cool domestic food inflation.

"The minimum export price (MEP) condition on export of onions is removed with immediate effect until further orders," the Directorate General of Foreign Trade (DGFT) of India said in a notification on Friday.

Haji Majed, an importer of Indian onions in Shyambazar, told TBS, "Indian exporters have told me about this easing of restriction and this will reduce the import cost by at least Tk15 per kg." 

Currently, imported onions are priced at Tk95 per kg wholesale in Shyambazar. In the Dhaka retail market, local onions are selling for Tk110-120 per kg, while imported onions are priced at Tk 110-115 per kg.

The MEP was designed to set a minimum price below which products could not be sold internationally, aiming to discourage exports and boost local supply. This restriction was imposed amid a rise in food prices last year.

The world's largest onion exporter banned overseas sales in December last year to boost domestic supplies after patchy rains in key states led to a 20% fall in output. Shipments were allowed on 4 May 2024 but with an MEP of $550 per tonne plus a 40% tariff.

In 2023-24, India exported onions worth Rs3,513 crore, a decrease from Rs4,525 crore the previous year, with Bangladesh importing 724,000 tonnes.

Ajit Shah, president of the Onion Exporters' Association of India, welcomed the decision, anticipating increased shipments to regular importers like Bangladesh, Malaysia, Sri Lanka, Indonesia, and West Asian countries.

Despite recent flooding causing some crop damage, the Indian government expects strong summer harvests due to a favourable monsoon. Consumer inflation in August dropped to a nearly five-year low of 3.65%, with food inflation at 5.35%, down from 9.94% the previous year.

"It has been decided to remove the current minimum export price (MEP) of $950 per metric tonne for issuing registration-cum-allocation certificates (RCAC) for export of basmati rice," a notification by the commerce ministry stated.

The government also asked the Agricultural and Processed Food Products Export Development Authority or APEDA, a regulatory body, to "immediately implement" the new policy.

Indian media reports indicate that earnings from basmati rice exports have sharply declined due to trade restrictions, prompting onion growers and traders to call for the removal of export barriers.

It directed APEDA to closely monitor export contracts for non-realistic basmati export prices.

Authorities will continue to monitor basmati exports for unusually cheap sales so that non-basmati rice isn't shipped out under the basmati tag, a food ministry official said.

Battling persistent high food prices, the world's largest rice exporter banned the export of all grades of non-basmati white rice on July 20. The curbs on basmati export were an additional step to ease food prices.

In August last year, the government imposed an MEP of $1200 per tonne of basmati exports when consumer cereal prices rose nearly 20%.

In October last year, the government reduced the MEP on basmati to $950 per tonne, which now stands scrapped.

MEP slowed down the export of the long grain and slashed export earnings from one of India's most sought-after, high-value farm export items. The country shipped basmati rice worth over $4.79 billion in 2022-2023, mostly to West Asia and the US.