Onion export tax: Plight of farmers far from over

Chhaburao Jadhav, director at the Vinchur sub-agricultural produce market committee (APMC) in Nashik, placed his hand on his chest as he recounted an incident involving challenging circumstances faced by a farmer’s family who had recently harvested onions. The farmer couldn’t sell his harvest at any APMC as onion traders called for strikes following the Centre’s decision to impose a 40 per cent export duty on onions.

Although the strikes have now ended and auctions at some APMCs have resumed, alongside the Centre’s August 22 announcement to procure an additional 200,000 tonnes of onions at the rate of Rs 2,410 per quintal, the plight of the farmers is far from over.

Jadhav explained how, in a glimmer of hope, the farmer, who had harvested close to 45 quintals of onions this season, saw a window of opportunity at the Vinchur market where auctions were bustling in full swing.

“The farmer explained that his mother was ill and urgently needed surgery. With most APMCs closed in the district, the farmer approached our market and sold his produce for cash, which was later used for his mother’s medical fees. The farmer wondered what he would have done if all the markets had remained shut,” Jadhav said as market employees announced details of the auction scheduled Wednesday.

Unlike Vinchur, the acres of APMC campuses in Lasalgaon and Pimpalgaon, which usually see thousands of farmers and traders, turned completely silent in the absence of auction sessions on Wednesday. However, most of their offices had a few farmers and traders present, hopeful of a positive development.

As one travels towards Vinchur, situated around 50 kilometres (km) from Nashik and roughly 6 km from Asia’s largest onion market in Lasalgaon, tractors and pick-up trucks loaded with onions become visible, parked on the sides of roads. Some of these vehicles can be seen queued up outside makeshift onion storage sheds near this hamlet, waiting to unload their produce in the space.

“You will find people here who are farmers and want nothing but a fair price for their onions. Currently, the commodity is being traded at a maximum price of Rs 2,511 per quintal, and we record inflows of close to 15,000-20,000 quintals of onions in the Vinchur market every day during the peak season. The only reason I keep this market open is that I am a farmer myself, and I understand the pain they go through when they can’t sell their produce,” Jadhav noted on Wednesday.

Several farmers Business Standard spoke to stated that they require anywhere between Rs 90,000 and Rs 1,30,000 for harvesting onions from a single acre of land.

“For one acre of harvest, seeds cost Rs 8,000 to Rs 10,000. Tilling the land adds another Rs 12,000 to Rs 14,000. The labour required to plant these seeds costs around Rs 10,000, and harvesting the crop requires an additional Rs 10,000 to Rs 15,000 per acre. Additionally, fertilisers constitute a significant portion of our expenses at Rs 20,000 to Rs 25,000. Other fertilisers or insecticides add about Rs 15,000,” said Gaurav Bhandare, a farmer from Niphad district.

Raj Shinde (name changed) said: “This season, it is nearly impossible to recover the costs involved in onion production due to the announcement of the export tax.”

An executive at the Lasalgaon APMC explained that the real burden of the export tax would be felt by the farmers.

“Traders might experience short-term losses. However, when such a tax is introduced, traders will try to push down the wholesale prices of onions per quintal to the farmers to save their margins. As a result, if export-grade onions are trading at Rs 2,000 and the rest at close to Rs 1,700, one could expect the prices of export-grade onions to drop by at least Rs 400. In this case, while export-grade onions will trade at Rs 1,600, who would buy the rest of the onions at Rs 1,700?” he observed.

Moreover, changes in weather patterns have also added stress to onion-growing farmers in the region. Hailstorms and unseasonal rains in the months of April and May led to the decay of onions even before they were harvested.

“Last year, I produced close to 200 quintals of onions from my land. This year, due to weather changes, that has dropped to a mere 40 quintals. Consequently, while I was expecting the price to surge beyond Rs 3,000 per quintal, I will have to settle for less due to the tax pressure,” Bhandare expressed.

“The decision taken by the Centre to impose a 40 per cent export tax is erroneous from a farmer’s perspective. The Centre’s decision regarding the export tax has affected farmers as their produce is not fetching the right price,” said Dilip Bankar, chairman at the Pimpalgaon (B) APMC while speaking to Business Standard.

While onion traders in the state had called for strikes last week, markets resumed operations on Thursday. However, with the export duty in place until December 31, traders’ issues also remain unresolved.

“The recent tax decision was made without sufficient discussions and deliberations with the participants in the industry. These should not have been implemented the way they have been this time,” said Sunil Thakkar, a Nashik-based onion trader.

Traders like Thakkar, who had previously closed deals with farmers and packed onions for export, will now have to pay a 40 per cent duty on the onions they export. However, traders explain that they are set to lose crores of rupees due to this decision.

“I have close to three containers packed with onions parked. There are 28-29 tonnes in each container. In total, there will be at least 100-125 containers parked near Mumbai and elsewhere. As exporters, we bought onions at Rs 24-26 per kilogram (kg). With the 40 per cent regime, we’re set to receive only Rs 10-12 per kg,” said another trader.

Some traders explained that while the tax will squeeze their margins this time, they will further reduce onion prices in the following auction sessions in the upcoming year to recover current losses.

“We’ll attempt to recoup our lost margins the next time we participate in auctions by offering lower rates than today,” the trader said.

Apart from bearing the impact of sudden policy decisions, another trader alleged harassment at the hands of central agencies.

“Seven years ago, all the onions in my storage decayed. Prices increased suddenly after a month, and my offices were raided. Despite the losses, income-tax officers asked me to declare a profit without considering the produce that had gone bad. How could I show a profit?” the trader asked.

As Business Standard concluded its conversations with traders and farmers, Jadhav insisted on visiting a Shiva bhojan thali centre in the Vinchur APMC campus.

“Lunch here is subsidised and costs only Rs 10. Do you think farmers who are making a profit would come here for lunch?” Jadhav asked.