Onion prices stay high as importers do not seek alternative markets

Onion likely to shed tears for 2 weeks:

• Onion price now: Tk120 and Tk180 per kg depending on quality
• Khatunganj importers have very little stock now
• Supply of new season local onions will increase in two weeks
• So, the crisis unlikely to end until then

Onion prices remain volatile in the country, surging again in recent days due to traders' reluctance to import the kitchen item amid concerns of potential losses before the upcoming harvest season.

The price of a kilogram of onion is now between Tk120 and Tk180 depending on quality, up from around Tk100 just a few weeks ago. The prices of onion reached as high as Tk220 after India imposed a ban on exports of onions until March 31, 2024.

But after some steps by agencies concerned and local administration the prices came down to as low as Tk100. But now the supply chain got disrupted due to shortage of stock and businesses' unwillingness to import onions from other countries amid market's uncertainty.

Onion, garlic and ginger traders in Khatunganj wholesale market in Chattogram told The Business Standard that the supply of onion is less than the demand in the market. Out of over one hundred warehouses at Khatunganj, only 4-5 have a small amount of onions. Mainly due to supply shortage, onion prices have increased again, they said.

Importers said the crisis is for the time being as local onions of the new season have already started hitting the market. India can also lift the export ban at any time, they said. In this situation, the traders are worried whether they will be able to make a profit by importing onions with the dollar exchange rate of around Tk120. Therefore, due to the uncertainty, some importers are refraining from importing onions from other countries.

After the ban on onion imports from India, evidence of not importing onions from alternative countries has been found at the Plant Quarantine Station. According to the information provided by the institution, since the announcement of the ban on 8 December, only two consignments of onions have arrived at the Chittagong seaport. Among them, 58 tonnes of onions arrived from China on the day after the announcement and another 58 tonnes arrived from Pakistan on 13 December.

Although these onions have entered the market after the announcement, the import process for onions from alternative countries has been delayed by at least another month. As of now, no onions have been imported from alternative countries after the India's onion export curb.

Earlier on August 19, when India imposed a 40% regulatory duty, onion prices soared in the local market to over Tk200. The Ministry of Commerce then allowed the import of onions from alternative countries to cool the market. Since that announcement, 2 thousand 419 tonnes of onions were imported till 8 December. Of the quantity, 1,218 tonnes of onions were imported from Pakistan and 1,208 tonnes from China.

Earlier, from January to August this year, no onions were imported from these countries, said Syed Munirul Haque, senior officer of Plant Quarantine Station.

Onion traders at Khatunganj said in the current market, there are locally produced onions from the new season, as well as imported onions from India and China, available in limited quantities. Among them, wholesale prices for new season local onions are at Tk110, Chinese onions at Tk120, and Indian onions at Tk170. In the retail market, new season local onions are being sold at Tk120-130, Chinese onions at Tk160, and Indian onions at Tk180.

Kumar Poddar, the owner of Grameen Banijyalay and kitchen goods trader at Khatunganj, said there are over one hundred wholesale points for kitchen items in the market. Among them, onions are available at only 10-15 points. Due to the scarcity of onions in most shops, commission agents have increased the prices following the directives of importers. Kumar Poddar further mentioned that in the market, there are now limited quantities of Indian and Chinese onions available, apart from new season local onions. However, these were imported before the ban on onion imports from India.

Khatunganj's Hamidullah Marco Kitchen Goods Traders Association General Secretary Idris Mia said "We have not seen any onion imports from alternative countries after the ban. So the onion prices are higher due to supply shortage. If there is no import, it will take at least two more weeks for the onion market to normalise. Because the new season local onion that has already hit the market, is still immature and insufficient compared to the demand. Traders believe that the supply of new season local onions in the market will increase in the next two weeks."

Why traders reluctant to import onions from alternative countries

Jasim Uddin, owner of Soumik Traders, a commission agent for kitchen goods at Khatunganj, said the demand for Indian onions is second to that of local onions among the consumers of the country. "Therefore, during various crises, importers import onions from some countries including Myanmar, China, Pakistan, Egypt, etc as alternative countries, but due to low demand, they cannot make much profit from these countries' onions. Due to this, there is a supply shortage in the market due to non-importation of onions from alternative countries," he explained.

Most of the stalls or shops at Khatunganj, dealing with kitchen goods, primarily function as commission agents. Importers from various borders supply onions through these commission agents. However, in the case of a crisis with Indian onions, traders turn to importing onions from alternative countries.

Nazim Uddin, owner of Makka-Madina Traders, a wholesaler that imports kitchen items, said when there is such a crisis, the traders import onions from alternative countries. "However, at the same time, with increased supply from several countries, the traders often find themselves grappling with oversupply issues. Therefore, although India has stopped exporting onions, onions have not been imported from alternative countries."

Sarwar Alam, proprietor of SK Haramain, another kitchen item importer, mentioned that due to the lack of specific information regarding demand and imports, importers repeatedly have to face challenges in assessing the situation.

"At this moment, obtaining LC approval from banks is particularly difficult due to the dollar crisis. Even if LC is obtained, the exchange rate for the dollar has increased. As a result, we have to think about whether we can make a profit by importing onions from alternative countries."

He further said, "Besides, if for any reason India suddenly lifts the ban, then the risk of loss will increase. Because consumers will never buy onions from China, Pakistan, Myanmar and Turkey if they have local and Indian onions. Therefore, the importers are not importing onions this time due to the risk of loss."