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India's onion export ban hits Asia, price goes up in neighbouring countries

Traders estimate that India accounts for more than half of all imports of onions by Asian countries. Its shorter shipment times against those from rival exporters such as China or Egypt, are key to preserving the taste of the perishable commodity.

FP Staff December 20, 2023 15:41:43 IST

Photo- Reuters

India’s decision to impose a ban on onion exports has led to a surge in prices for the vegetable among Asian buyers, who are scrambling for cheaper alternatives, particularly as New Delhi is unlikely to lift the curbs before general elections next year.

India banned export of onion on December 8 as domestic onion prices in India became more than doubled in three months due to a decline in production.

Retail shoppers from Kathmandu to Colombo are grappling with elevated prices, as traditional buyers in Asia, including Bangladesh, Malaysia, Nepal, and even the United Arab Emirates, heavily rely on imports from India to meet their domestic demands. The expectation that India is unlikely to lift the export restrictions before next year’s general elections further adds to the uncertainty surrounding the situation.

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“Onions are needed for almost everything we cook,” said Mousumi Akhtar, who works in the private sector in Dhaka, the capital of Bangladesh. “This sudden price hike is tough to swallow. I’ve had to cut back on how much I buy.”

From the belacan shrimp paste of Malaysia and Bangladeshi biryani to chicken chillies in Nepal or Sri Lankan fish curry, Asian consumers have built up a serious dependence on Indian supplies of onions to lend spice to their favourite dishes.

Traders estimate that India accounts for more than half of all imports of onions by Asian countries. Its shorter shipment times against those from rival exporters such as China or Egypt, are key to preserving the taste of the perishable commodity.

India exported a record 2.5 million metric tons of onions in the financial year that ended on March 31, with 671,125 tons going to neighbouring Bangladesh, its biggest buyer of the vegetable.

To overcome the shortage, Bangladesh is trying to source more from China, Egypt and Turkey, said commerce ministry official Tapan Kanti Ghosh.

As general elections approach next month in Bangladesh, the government has begun selling onions at subsidised prices to the poor, hoping to offset a surge of more than 50% in prices after India’s ban.

Even worse is the situation in landlocked Nepal, which imports most of its onions.

“Since the ban by India, we have monitored the supply situation at different places. There are no onions on sale,” said Tirtharaj Chiluwal, an official of the Himalayan nation’s commerce ministry.

Nepal is considering imports from China and may ask India to make an exception and allow exports, said ministry spokesperson Gajendra Kumar Thakur.

LIMITED OPTIONSImporting nations have to contend with more expensive supplies from China, Iran, Pakistan and Turkey, which have all hiked prices since India is out of the market, said Ajit Shah, an Indian exporter.

All would run out of supplies if India’s ban lasted for an extended period, said one exporter based in Mumbai, the financial capital.

Within a week after the ban, onions became 20% cheaper in India as supplies from the new season’s crop came in, traders said.

Now, with domestic supplies more than adequate to satisfy demand at home, Shah, the exporter, said India should allow exports to maintain its global market position.

But the curbs are unlikely to go before next year’s general elections, as the priority of Prime Minister Narendra Modi’s government is to hold down food prices, the Mumbai-based exporter said.

New Delhi has also reined in exports of rice, sugar and wheat.

Since India’s ban, onion prices have nearly doubled in Sri Lanka, which is slowly emerging from its worst financial crisis in nearly seven decades.

Malaysia, like other importers, is also trying to secure supplies from China and Pakistan, said Seri Mohamad Sabu, its agriculture minister.

With inputs from Reuters.