The Hindu Editorial Analysis- 9th May 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

A Sob Story 

Why in News?

Recently, the Indian government allowed some onion exports to the UAE despite an ongoing export ban, aiming to reduce domestic surplus.

• However, critics allege the selling price in the UAE market is significantly lower than global prices, reducing their profits and raising concerns about unfair practices.

What is the Current Issue Related to the Export of Onion?

• Ban on Onion Exports: In December 2023, the Indian government prohibited the export of onions to mitigate potential domestic shortages, except for specific countries like the UAE upon diplomatic requests.
• Price Disparity: Indian farmers are experiencing significantly lower prices for onions compared to the notably higher prices in UAE markets. For instance, while onion prices in the UAE have soared to as much as $1500 per tonne, recent Indian shipments to the UAE were priced at around $500 to $550 per tonne.
• Concerns Raised by Exporters:
  • Lack of Transparency: There are concerns among farmers and exporters regarding the opacity in determining export prices and selecting exporters and importers.
  • Windfall Profits: Exporters allege that certain importers in the UAE are making excessive profits at the expense of Indian farmers.
• Export Management: The exports are overseen by the National Cooperative Exports Limited (NCEL), a government-owned entity in India. However, importers in the UAE are private traders and supermarket chains, rather than government agencies focused on food security.
• Violation of Trade Norms: Exporters argue that the process in the UAE deviates from standard trade norms. In usual practice, local onion suppliers bid for the lowest price, while buyers are selected based on the highest offer. However, this process is allegedly not followed in the case of exports to the UAE.
• Absence of MSP (Minimum Support Price): Onion farmers do not benefit from government-provided MSP-based procurement, relying solely on market dynamics for their income.
• Price Disparity: Farmers receive considerably low prices for their onions compared to international market rates, resulting in substantial financial losses.
• Impact of Unseasonal Rains: Unanticipated heavy rains in March and April 2023 damaged a significant portion of harvested onions, rendering them less suitable for storage. Consequently, farmers are forced into distressed sales of onions prone to rapid quality deterioration.
• Concerns about Export Bans: Frequent government-imposed bans on onion exports due to domestic shortages can disrupt the market and adversely affect farmers' income.
• Storage and Sales Strategy: Most rabi onion farmers typically store their crops after harvesting to prevent moisture and sprouting. They gradually sell them from September to October before the next kharif crop. Higher returns during the off-season enable them to recover from losses incurred during earlier low-price sales. However, measures like export bans undermine their ability to achieve expected profits.
• Impact on India's Reputation: Export bans on essential commodities like rice, wheat, or onions could tarnish India's reputation as a reliable global food supplier. Restoring this reputation may pose significant challenges, potentially affecting future trade relationships and opportunities.

What are the Steps Needed to Address the Issues of Onion Farmers in India?

What are the International Treaties/Policies Related to Import and Export of Agricultural Products?

• WTO Agreement on Agriculture: This agreement, born out of the Uruguay Round negotiations, seeks to overhaul trade practices in the agricultural sector, promoting market-oriented policies. Key objectives include reducing subsidies, lowering trade barriers, and enhancing the predictability and transparency of agricultural trade. India is a signatory to the WTO Agreement on Agriculture (AoA).
• Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement): These measures are designed to safeguard human, animal, and plant life or health by addressing risks stemming from pests, diseases, additives, contaminants, toxins, or disease-causing organisms in food, beverages, or feed. India is a participant in the SPS Agreement.
• International Plant Protection Convention (IPPC): This convention serves to shield the world's plant resources from the spread and introduction of pests while promoting secure trade practices. India is a member of the International Plant Protection Convention, underscoring its commitment to preserving global plant health and facilitating safe international trade.

What are the Key Facts About Onion?

• Onion Description: The onion, a member of the lily family, is an herb prized globally for its culinary uses and medicinal properties.
• Major Producer: India holds the distinction of being the world's second-largest onion producer.
• Key Producing States: Maharashtra, Karnataka, Orissa, Uttar Pradesh, Gujarat, Andhra Pradesh, and Tamil Nadu stand out as major onion-producing states in India.
• Production Statistics: Maharashtra leads in onion production, contributing 42.53% of the total share, followed by Madhya Pradesh at 15.16% according to the 2021-22 (3rd Advance Estimate).
• Export Destinations: Indian onions find their way to major export destinations like Bangladesh, Malaysia, United Arab Emirates, Sri Lanka, and Nepal, underscoring the global demand for this versatile vegetable.