The Financial Express
Swasti Lankabangla Swasti Lankabangla

Onion crisis: Short-sightedness of authorities, businesspeople  

| Updated: December 07, 2019 20:48:44

Onion crisis: Short-sightedness of authorities, businesspeople   

Crisis of onion is neither new in Bangladesh, nor is the ongoing crisis a sudden one. But there is no serious study on the issue. Bangladesh needs 2.4 million tonnes of onion a year, according to government statistics. The country usually imports 1.1 million tonnes of onion from neighbouring India to meet its shortfall in supply.

The country experienced an onion shortage in 2013. The US-based International Food Policy Research Institute (IFPRI) studied demand and supply situation of onion and reported in September 2013 that market prices of onion rose dramatically between early July and late August. After showing a downward trend at the end of August and early September, the price reportedly rose again.

The IFPRI study recommended reducing dependence on India by importing onion from alternative sources such as China, Egypt, Malaysia, Myanmar, Pakistan, Turkey, and Vietnam. Another recommendation was that imports should be made carefully assessing their impacts on local prices so that price reduction does not become a disincentive for Bangladeshi farmers to produce onion. The IFPRI said the authorities should be vigilant against speculative storage between September and December, when Bangladesh is most dependent on onion imports. To increase domestic production, recommendation was made to ensure supply of high-quality inputs - particularly seeds, fertilisers, and pesticides - to farmers in a timely manner.

The current onion crisis in the country was a predictable one. Fresh Plaza, a team of writers, editors, and account managers based in The Netherlands, published a report on July 17, 2019 about shortage and increase of price of onion in Bangladesh market. This price hike followed increase in onion prices in India.

In a report on global onion market, Fresh Plaza said in January 2019 that due to limited harvest as a result of the dry weather, onion stocks are considerably smaller.

The shortage was duly predicted in India and the Indian government removed promotional 10 per cent incentives for export of fresh and chilled onions on June 11, 2019, a move aimed at discouraging outbound shipments of the kitchen staple due to rising prices in the domestic market. The Directorate General of Foreign Trade (DGFT) of India, in a notification on September 13, announced a minimum export price for onion at $850 a tonne. In another order on September 24, 2019, the Indian authorities prohibited export of all varieties of onions until further notice.

And the onion crisis worldwide and in India was felt in Bangladesh. In Benapole land port, imports of Indian onion came down to one-third in June. Subsequent months saw increasing onion price.

Other countries read the global situation properly and tried to import from alternative sources of onion from early this year. But Bangladesh authorities and businesspeople failed to take note of onion production and market forecast. Thus Bangladeshi consumers became the worst sufferers of their short-sightedness. Even India started importing onions from Egypt in an effort to keep onion prices stable.

However, Bangladesh's policymakers believe the price hike of onion was an irrational act, orchestrated by a market syndicate. The National Board of Revenue (NBR) claimed to have information about imported onions being hoarded illegally to create an artificial market crisis. Allegations of money-laundering in the name of onion imports were also there. The NBR chairman claimed that the onion stock in the country was enough and there was no rationale for such a crisis.

The Customs Intelligence and Investigation Directorate (CIID) of the NBR, in an investigation into abnormal price hike of onion, summoned 46 of onion importers. However, the import policy or customs law does not permit the NBR to carry out investigation into the stock of importers. The mobile courts penalised small traders for selling onion at higher price.

The market was not handled prudently. Perhaps Bangladesh is the only country that did not take seriously the market prediction about global crisis of onion.

Instead, the authorities should fix import duties on import of onion taking into account cost of production and cost of import to encourage the local farmers to raise production to substitute imports of onion with local one. Action by mobile courts, investigation by intelligence agencies and rampant allegations against traders would only complicate the situation.


MS Siddiqui is a legal economist.


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