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Daily News Analysis

Explained: Why the government has banned export of onion

16th September, 2020 Economy
  • Context: The central government has banned the export of onions. A look at the export ban, and its possible repercussion in the days to come.
  • Central government issued a notification prohibiting the export of onions as the price of onion crossed the Rs 30 per kg at Maharashtra’s Lasalgaon wholesale market.

What were the triggers that led to the export ban?

  • The steady increase in wholesale prices of onions, which has seen the kitchen staple becoming costlier in the urban markets.
  • The immediate trigger which led to the ban can also be found in the Consumer Price Index (CPI) numbers released by the Ministry of Statistics and Program Implementation (MoSPI) which measures the inflation was 6.69 per cent well above the Reserve Bank of India (RBI)’s target of 6 per cent.
  • At the policy level, the high CFPI and the rising price of onion were enough triggers to get an export ban on onion at a time when farmers were offloading their stored onions.

Why are onions costlier in wholesale markets?

  • Exceptionally heavy rains, which have led to a near-complete washout of the almost market-ready onion crop in Karnataka.
  • Demand for Indian onion rising from international markets. Demand from Sri Lanka, exporters say has suddenly picked up as the island nation also has reported heavy destruction of their crop due to rains.

So will the export ban bring down onion prices?

  • Once the markets open for trade, a sharp depreciation in prices is expected to take place in view of the export ban.
  • However, traders feel the prices are again going to rise in a week or so as the overall supplies will remain stressed.
  • The new crop, will arrive only post November and with the demand expected to rise before the Dussehra festive season starts, prices will continue to remain bullish.