On August 19, the government put a 40% levy on the export of onions in an effort to restrain price growth and boost supplies in the domestic market. Through a notification, the Finance Ministry levied a 40% export tariff on onions through December 31, 2023. The export tax was announced in the midst of reports predicting an increase in onion prices in September.
To guarantee that prices are kept in check until the fresh crop starts to arrive in October, the government last week stated that it will release onion from its buffer stock in the selected locations with immediate effect.
According to news agency PTI, the government is looking into a number of methods for the disposal of onions, including e-auctions, e-commerce, as well as through states at discounted prices via retail stores of their consumer cooperatives and companies.
Although there is a plentiful supply of onions throughout the country, a substantial percentage of them are of poor quality because of this year’s lengthy period of extreme summer heat.
In addition to the high percentage of poor grade onions, dealers claimed that significant inflation in other vegetables is another factor driving up onion costs.
In July, India’s annual retail inflation increased significantly to a 15-month high of 7.44% from 4.87% the previous month, driven mostly by a steep increase in the cost of vegetables and cereals. For the first time in five months, the data exceeded the upper limit of the RBI’s 2%–6% inflation range.
According to the bulletin, high-frequency food price data for August so far suggests that the cost of cereals and pulses has risen this month. Although more recent data shows modest price reductions, tomato prices overall continued to rise, the RBI stated.
In its August bulletin, the Reserve Bank of India reported that the prices of potatoes and onions had also increased sequentially.
