Import duty withdrawal suggested to cool down overheated onion market

Highlights: 

• The local variety selling for Tk90-100 per kg
• Imported onions selling for Tk75-80 per kg
• Local variety price jumped by Tk15 per kg, imported variety by Tk10
• Tariff Commission recommends withdrawal of 5% customs duty and 5 AIT on imports
• It also recommends imports from alternative sources like Myanmar, Turkey and Egypt

The Bangladesh Trade and Tariff Commission has recommended the withdrawal of the existing 10% duty on the import of onions to cool down the market heated up by India's export restrictions.

According to traders and consumers, the price of the essential kitchen ingredient has shot up by Tk15 per kg to Tk100 in a span of just two days.

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 local prices, reports Reuters.

In a letter on Monday, the commission requested the National Board of Revenue (NBR) and the commerce secretary to take necessary measures regarding duty reduction.

Currently, onion importers have to pay 5% customs duty and 5% advance income tax (AIT). The Tariff Commission has recommended withdrawing the duty till 31 December.

The commerce ministry has also been advised to emphasise the import of onions from alternative countries. Earlier, onions were imported from various countries such as Turkey, Egypt, Pakistan and Myanmar to resolve the instability in the onion market.

As per the Tariff Commission, subsequent to the imposition of export duties by India, the import price of onions has surged to $400-$420 per tonne, compared to the earlier $280-$300.

Usually, every year from August to January, dependence on onion import increases in the country.

The Tariff Commission has suggested that both the Trading Corporation of Bangladesh (TCB) and private entrepreneurs could be encouraged to source onions from alternative suppliers. It will help maintain stability in the price and supply of onions in the local market.

Local variety hits Tk100 a kg  

With the onion market taking a hit from India's export curbs, the local variety has jumped to Tk90-100 per kg from Tk80-85 just two days earlier. Similarly, the price of imported Indian onions has increased from Tk65-70 to Tk75-80.

Although no onions of increased export value have yet entered the country, the prices of both the local and Indian varieties at Bhomra Land Port, Satkhira, have increased by Tk15 per kg.

Dipu Roy, proprietor of the importing company Srishti Trading, said that before the tariff was imposed, Indian onions were sold at Tk45-50 per kg. Now an additional Tk15 is being charged at the port.

Besides, imports are decreasing, and the price of onions is expected to increase further, he added.

Meanwhile, wholesalers started selling onions at higher prices on the very night of India's duty imposition.

Within a day, the price of onions, which was at Tk75-76 per kg, rose to Tk85-90. The impact is starting to trickle down to the retail market.

Mintu, a wholesaler at Karwan Bazar, told TBS, "As soon as India announced the duty imposition, the wholesalers of Pabna and Faridpur increased prices. At the same time, they are selling onions in lower quantities. That is why it has to be sold at a higher price."

On Monday, some vendors at Karwan Bazar, Malibagh, Rampura, Segunbagicha, Badda, and Shantinagar kitchen markets were seen selling the local variety for Tk80-85 and imported onions for Tk70 per kg.

Shamsun Nahar, a grocer in Badda, told TBS, "Onions from Pabna have to be sold at Tk100 from today. But there are some onions from Faridpur, which I am selling at Tk90."

Shariful Islam, another shopkeeper in the neighbourhood, said, "There is no scope of selling the local variety for less than Tk100."

Import situation

According to the Department of Agricultural Extension (DAE), the production of onions in the country is more than 35 lakh tonnes. Post-harvest loss is the major reason for the country's import dependence, despite production exceeding demand.

According to data from the Bangladesh Institute of Nuclear Agriculture, the post-harvest loss of onions is 25%, which amounts to Tk2,000 crore every year.

The Tariff Commission says 70-75% of demand can be met with locally produced onions, while the rest has to be imported.

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 DAE's Plant Quarantine Wing. But the government has allowed the import of more than 13.04 lakh tonnes.  

In the last fiscal year, 7.43 lakh tonnes of onions were imported.

Agriculture minister's reactions 

On 20 August, Agriculture Minister Abdur Razzaque asserted that the country possessed ample onion reserves and that India's decision would not lead to a price increase. However, his statements have been contradicted by the subsequent reality, as the price of onions surged to Tk100 per kg overnight.

The minister told reporters at the Secretariat on Monday that traders will be allowed to import from any country outside India.

"We cannot control the market even if we wish to. It depends on supply and demand. As supply increases, prices will decrease. There is nothing we can do to solve the problem immediately. The only option is to import from other countries and strictly monitor the market," he added.

Upon calculating daily demand, it has been observed that the country's average onion requirement is approximately 7,500 tonnes. With an extra cost of Tk15 per kg borne by consumers, the total amount surpasses Tk11 crore.