The Indian government's recent decision to remove the $950 per tonne minimum export price (MEP) on basmati rice and slash the export duty on onions from 40% to 20% is a significant step aimed at bolstering the country's agricultural export sector. These moves come as part of a broader strategy to support farmers and boost exports ahead of key assembly elections in states like Maharashtra and Haryana, both of which are crucial agricultural hubs.
For basmati rice, which is primarily grown in regions like Haryana and Punjab, the removal of the MEP is expected to provide a much-needed boost to exports that had been stagnating due to high price restrictions. The $950 per tonne MEP was introduced to curb the illegal export of non-basmati rice disguised as premium basmati, but it also led to a reduction in outbound shipments. With the MEP now scrapped, India’s basmati rice exports, which totaled $5.9 billion in 2023-24, are expected to rise significantly, especially as global demand for fragrant rice remains strong. The government has tasked the Agricultural and Processed Food Products Export Development Authority (APEDA) with closely monitoring export contracts to ensure that realistic prices are maintained for the commodity in the global market.
On the onion front, the 40% export duty that had been imposed earlier in the year led to concerns among onion farmers, particularly in Maharashtra, who saw reduced earnings from the international market. Onions are a key cash crop in Maharashtra, and the reduction of the export duty to 20% is expected to alleviate the burden on producers while helping increase India's share in the global onion trade. This decision also comes at a time when domestic onion prices have been fluctuating, with the all-India average price of onions reaching Rs 50.83 per kg, and retail prices as high as Rs 83 per kg in some regions. Despite the high prices, the government’s focus on boosting exports is seen as a way to ensure that onion farmers can benefit from international demand, especially as India has a bumper crop in the pipeline, with reports suggesting a sharp increase in the kharif (summer) onion sown area to 2.9 lakh hectares compared to 1.94 lakh hectares last year.
Moreover, the government has been proactive in managing domestic onion prices through initiatives such as retail sales of onions at a subsidized rate of Rs 35 per kg in cities like Delhi-NCR and Mumbai. This is being done through agencies like the National Cooperative Consumers' Federation of India Ltd (NCCF) and the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), which maintain buffer stocks of onions to control price surges. Currently, these agencies are holding a buffer stock of 4.7 lakh tonnes, ensuring sufficient supply in the market.
In tandem with these agricultural reforms, the government has also taken steps to regulate wheat stocks by imposing tighter holding limits for traders, wholesalers, large-chain retailers, and processors. These restrictions, which were initially put in place in June 2023, are intended to prevent price spikes due to hoarding and are now extended until March 2025. Wheat, a staple food grain in India, has seen price fluctuations in recent months, and the government is keen on ensuring that there is no artificial scarcity in the market. By enforcing stock limits, the authorities aim to keep wheat prices stable while safeguarding the interests of consumers.
The removal of the MEP on onions and basmati rice, coupled with the reduction in onion export duties, reflects the government’s dual objectives of boosting exports while ensuring that farmers’ incomes are protected. These measures are also indicative of the broader approach the government is taking to balance the needs of the domestic market with international trade opportunities. As global demand for Indian agricultural products continues to rise, these policy shifts could significantly enhance the competitiveness of Indian exports in the international arena, while also providing relief to farmers and traders who have been impacted by restrictive export policies over the past year.
Overall, these policy changes are expected to have far-reaching effects on India's agricultural economy, influencing not only the income of farmers but also the pricing dynamics of key commodities like rice, onions, and wheat. The timing of these decisions, ahead of major elections, also underscores the political significance of addressing farmers’ concerns, particularly in regions that play a crucial role in the country's agricultural landscape.
