In a move that might raise eyebrows in global trade markets, the Indian Government has decided to impose a hefty 40% export duty on onions. Their primary objective? To prioritize and protect domestic supplies. And while this decision is sure to be analyzed and dissected in the ever price-sensitive Indian subcontinent, the rationale behind it remains crystal clear.

The Onion Toolkit's Big Blunder - An Epic Fail for the Hindu Middleclass

Recollect the notorious tomato caper? Yes, the one where tomato prices skyrocketed overnight. Well, there was a whisper in the wind, suggesting the powerful onion cartel was gearing up to orchestrate a similar price hike for onions. But the government, always a step ahead, sensed the plot and decided to nip it in the bud with its proactive stance.

This past Saturday, official sources confirmed the Centre's decision to impose a 40% duty on onion exports. This action is expected to have a domino effect on onion prices, hopefully cooling them down, especially when considering that the current price is a significant 20% more than what it was the previous year. For those eagerly flipping through their calendars, this notification is effective immediately and will stay in place until December 31, 2023.

However, the onion isn't the only vegetable grabbing headlines. Tomato prices, which had seen a surge in August, are now showing signs of stabilization. But don't just take our word for it. The Reserve Bank of India (RBI), in its latest bulletin, has observed a similar trend. Moreover, the bulletin also highlighted a sequential increase in the prices of onions and potatoes.

While many might see this as a bureaucratic move, Consumer Affairs Secretary Rohit Kumar Singh has a more straightforward explanation. He remarked that the central objective of this decision is to ensure that onions, a staple in most Indian households, remain available at reasonable prices domestically.

Furthermore, the government’s recent action isn’t isolated. It's part of a broader strategy where trade-related measures are employed tactically to keep inflation in check. And if one might say, with just the right touch of sarcasm, "Nice try, Onion Toolkit. But this time, the ball's in the government's court."

Indian Government Continues Its Balancing Act: Following Wheat and Rice, Now Onions

In an unfolding series of government interventions, after having curtailed the freedom of wheat and rice exports, the Centre is back, shining its spotlight firmly on onions. It's all part of an intricate dance, keeping pace with the fluctuating food market and ensuring the citizens aren’t left teary-eyed. This comes on the heels of the Centre’s previous move, where they slashed the import duty on edible oils to regulate soaring prices.

Why all this fuss about onions, you ask? The broader picture tells a compelling story. India's Consumer Price Index (CPI), a key metric to gauge inflation, stood alarmingly at 7.44% in July. This isn’t just a random number—it's a siren, ringing well above the Reserve Bank of India's (RBI) stipulated comfort zone of 6%. And while multiple factors feed into this, the spiraling prices of food and vegetables are primary culprits.

Now, let's delve deeper into the onion saga. Crisil Market Intelligence and Analytics, a renowned market research agency, paints a detailed portrait of this scenario. According to their meticulous analysis, the present inflation trend is tied intricately to supply constraints. They've issued a forecast that suggests onion prices might ascend to a staggering Rs 60-70 per kg come early September. However, they're also quick to highlight a silver lining: these anticipated prices, albeit high, will remain below the dizzying peaks seen in 2020.

But the onion plot thickens. The typical shelf life of rabi (winter) onions suffered a blow earlier this year due to panic-driven sales, a reaction to unpredictable market conditions. The consequences? The onion stocks in the open market, which were anticipated to last till September's end, are getting depleted at an accelerated rate. This unforeseen shortening of the supply window, extending the lean season, is set to result in an even tighter grip on available stocks, inevitably driving prices upwards.

In response to this looming crisis, the government, ever vigilant, announced a strategic move last week. Onions from its buffer stock are being released to stem the tide and stabilize prices, at least until the new crop graces the markets in October.

How will the government ensure these onions reach the populace? Enter a modern distribution strategy. They’re embracing e-auctions, catering to the tech-savvy. E-commerce platforms are also in play, addressing the growing trend of online shopping. Furthermore, they're initiating collaborations with state authorities. These alliances aim to facilitate onions reaching consumers at discounted rates via retail outlets, all under the watchful eyes of consumer cooperatives and corporations.

Currently, the government's vault boasts an impressive stockpile of 3 lakh tonnes of onions, all safeguarded within the Price Stabilisation Fund (PSF). This reservoir is a testament to foresight, poised to tackle any unexpected price surges during periods of onion scarcity. So, as the layers of this onion saga unfold, it's evident that the government is striving to keep prices stable and kitchens across the nation well-stocked.

Mostly went un-noticed since we controlled the situation pro-actively but some were visible. Rahul Gandhi truck ride and Azad pur mandi are well connected like Tamato and Onion. This post was last year