Centre imposes 40% duty on onion exports, to offload stocks
Context
Onions exported were subject to a 40% tax on Saturday by the Center. To lower the retail prices, the government will also liquidate its stock of onions in several wholesale marketplaces. The cost of the necessary vegetable has gone up by at least $5 nationally from the previous year.
Why did government impose a 40% tax on Onions?
- Stabilizing Domestic Prices: Stabilizing domestic onion prices was one of the main justifications for applying the levy. A common vegetable in India, onions are subject to price fluctuations because of supply and demand, climatic conditions, and storage concerns. The government intends to prevent unexpected increases in onion prices that may affect consumers by limiting exports and boosting domestic supply.
- Season of Festival Demand: The choice was made in preparation for the holiday season when demand for necessities like onions usually increases. To ensure a sufficient supply during this time of heightened consumption, the tariff was imposed and onion inventories were made available on the domestic market.
- Taking Care of Farmers’ Concerns: It is also likely that the decision to control onion exports was made in response to the worries expressed by farmers and political figures like Supriya Sule. Due to oversupply, farmers frequently encounter difficulties when prices fall too low. The government’s intervention tries to guarantee that farmers receive reasonable prices for their produce.
- Preventing Price Increases Driven by Exports: Rohit Kumar Singh, the secretary for consumer affairs, cited the recent dramatic increase in onion exports. Demand from exports may result in less domestic supply and hence higher domestic pricing. To prevent an inflationary influence on onion prices, the government sought to maintain a balance between domestic and foreign demand by imposing an export duty.
- Market Cool-Down Effect: The government’s decision to sell off onion inventories and apply export taxes was announced, and this immediately had a cooling effect on the market. As a result of both individual traders unloading their stocks and the anticipated rise in supply, prices began to stabilize and even decline.
What is the present condition of onions price inflation in the market?
Onions now cost at least Rs.5 more on average nationally than they did a year ago. The national average cost per kilogram on the aforementioned Saturday was rs 30.72. The maximum cost per kilogram was rs63, while the lowest cost was rs10 per kg.
What are the other ways in which we can curb the inflation price of onion?
Increase Domestic Production:
- Promote contemporary farming practices and technologies to increase yield to increase domestic production.
- Better seeds, fertilizers, and irrigation systems should be made available to farmers.
- Encourage the cultivation of hybrid or disease-resistant onion cultivars as well as crop diversification.
- To increase productivity, encourage research and development in onion-growing techniques.
Effective Distribution and Storage:
- To cut down on spoilage-related post-harvest losses, invest in contemporary storage facilities.
- Create effective distribution systems to guarantee the smooth movement of onions from farmers to markets.
- Utilize cold storage facilities to increase the onions’ shelf life.
Import management:
- Take into account regulated imports to meet demand and keep prices stable if domestic supply is insufficient.
- To prevent supply shortages, make sure import procedures are prompt and open.
Economic Policies:
- To maintain a balance between domestic supply and demand, track and regulate onion imports and exports.
- To prevent excessive outflows that can influence local availability and prices, adjust export policies and tariffs as necessary.
Climate-Resilient Agriculture:
- To lessen the effect of unfavourable weather conditions on the production of onions, encourage climate-smart agriculture techniques.
Farmer cooperatives’ strengthening:
- empower farmers to collectively bargain for better prices and gain access to resources through producer cooperatives and groups.
