Onion market takes heat from India's hefty export duty

• The wholesale price rose Tk14-24 per kg in a day
• Some retailers already started charging Tk5 more per kg. 
• Traders fear instability in onion market within a day or two
• Wholesalers selling imported onions at Tk310-330 per 5kg, an increase from Tk280

The local onion market has started taking heat from a hefty export duty imposed by India, a major supplier of the essential kitchen ingredient to Bangladesh.  

According to traders, the wholesale price has shot up by Tk70-120 per 5kg in a span of just one day. 

The retail market has yet to take full effect. However, some retailers have already started selling onions at a higher price of Tk5 per kg. Traders in different kitchen markets fear instability in the onion market within a day or two.

On 19 August, the Indian government imposed with immediate effect a 40% export duty on onions up to 31 December in an attempt to dampen their local prices, reports Reuters.

In Karwan Bazar, the largest wholesale kitchen market in the capital, onions were being sold at multiple rates. A wholesaler who sold the local variety of onions for Tk380 per 5kg a day ago was asking for Tk500 yesterday.

Most dealers were selling at Tk450, while a few were seen selling onions for Tk380.

The picture is the same for imported onions. Wholesalers were selling imported onions at a price range of Tk310-330 per 5kg, which is an increase from the previous price of Tk280.

In the retail market, the local variety of onions were selling for Tk85 per kg and imported onions for Tk70. However, some shopkeepers were seen asking Tk90 for the local variety.

Dealer Md Mintu has attributed the price increase, which occurred within a span of just one day, to the rise in the Indian market.

"On the night of 19 August, the owner called and asked to stop the sale of onions, whichever were in the stock. If possible, buy it from someone around, whatever the price," an employee at a wholesale store told The Business Standard.

Ashraful Alam, a salesman at a dealer, said, "We buy onions from Pabna. The prices have increased there too, and they are selling onions in fewer quantities."

According to the Department of Agricultural Extension (DAE), onion production in the country has crossed 35 lakh tonnes. At least 25% is accounted for as post-harvest loss in onion stocks. Sometimes, this loss is even greater. While the agriculture ministry says that the demand for onions is around 28 lakh tonnes.

However, onion traders, including importers, say that the production of onions in the country is less than what the government is showing. That is why there is a crisis.

There was widespread instability in the onion market at the end of May, when the price of the local variety shot up to Tk105 per kg.

Despite repeated requests from the commerce ministry, the agriculture ministry did not allow its imports, so the price exceeded Tk100. On 5 June, the government allowed imports. With the arrival of Indian onions, the price gradually came down.

The price of the local variety fell to Tk75 but again became stable at Tk85, while the price of the imported variety rose from Tk50-55 to Tk70.

A total of 3.65 lakh tonnes of onions have arrived in the country since imports were allowed on 20 August, according to data from the Plant Quarantine Wing of the DAE. But the government has allowed imports of more than 13.04 lakh tonnes. That is, only 27.64% of the allowed amount has arrived in the country.

According to sources in the commerce ministry, the government has information that there is a shortage of onions in the country. In view of this, the commerce ministry has repeatedly issued demand letters to the agriculture ministry.

But there is not as much interest among businessmen in importing as in getting permission.

Haji Md Majed, an onion importer at Shyambazar, told TBS, "If we see we have to incur losses, then no one will bring it. When there is profit, everyone will import.

"The import cost will increase now. Earlier, we bought onions at around $300 per tonne. Now the cost will increase up to 40%."

Importers said in Shyambazar too, onion prices have increased by Tk7-10 per kg, and the local variety is selling at Tk70-72 and the Indian variety is selling at Tk60-62 per kg.

According to a report published in the Economic Times of India, the prices of quality onions used by household consumers are set to nearly double to Rs55-60 per kg by September. To prevent this instability, the government has already released 3 lakh tonnes of onions into the market.  

Meanwhile, the Trading Corporation of Bangladesh is currently selling subsidised rice, oil, and lentils to 1 crore cardholder families. Since the price is high in the market, they also want to add onions to it. That is why an international tender has recently been called for the purchase of 20,000 tonnes of onions.

A senior official at the commerce ministry told TBS, "In the next two to three months, onions will make us suffer a lot. The agriculture ministry was asked at the beginning of May to allow the import. But they didn't give it. On the contrary, they said, there is no shortage of onions in the country.

"If so, why did the price of onions in the wholesale market increase so much in one day's announcement?"

He said India will then fix the minimum export price and may ban exports in the next phase.

In response to questions from journalists at an event on Sunday, Agriculture Minister Abdur Razzaque said farmers still have relatively large stocks of onions.

"So there will not be much impact on onion prices in the country. After the announcement of the tariff, the prices will go up a little, but will come down after a few days," he added.

The minister said they will make efforts to import onions from Turkey, Egypt, and China.