War in West Asia and protectionist steps by Bangladesh disrupt onion exports, lead to price crash

Onion farmers across Maharashtra have called for immediate government intervention as farm gate prices of the crop have collapsed, driven in part by disruptions to exports amid the ongoing conflict in West Asia, a key destination for Indian onions.

The sudden contraction in overseas demand has exacerbated a domestic glut, pushing prices to levels that, farmers say, make even harvesting and transportation unviable.

Prices in Maharashtra’s mandis (wholesale markets) have crashed to as low as Rs 300-Rs 800 per quintal, a level that farmers say is devastating given that the average cost of production stands at approximately Rs 1,800 per quintal.

At these rates, growers cannot recover even basic post-harvest expenses. In several places, the situation has deteriorated to the point where farmers have been forced into distress sales, and some have resorted to dumping onions on roadsides in desperation, says Bharat Dighole, president of the Maharashtra State Onion Growers Farmers Organisation.

In a letter to Maharashtra Chief Minister Devendra Fadnavis, Dighole, on behalf of farmer groups, has urged the state government to forward a proposal to the Union government for activation of market interventions scheme (MIS), and has insisted that the scheme not be limited to the district level but be rolled out at the taluka or subdistrict level — ensuring that procurement centres are established in every onion-growing taluka.

Under the scheme, the government would step in as a buyer in the market, which would curb panic selling, bring price stability, and check the artificial depression of rates by traders.

MIS is implemented at the request of a state/UT government, which is ready to bear 50 per cent of the loss (25 per cent in case of north-eastern states), if any, incurred on its implementation. Its objective is procurement of horticultural/agricultural commodities which are perishable in nature and are not covered under any price support scheme. It protects the growers of these commodities from making distress sale in the event of a bumper crop during the peak arrival period when the prices tend to fall below economic levels and cost of production.

The scheme is triggered when there is either at least a 10 per cent increase in production or a 10 per cent decrease in the ruling market prices over the previous normal year.

Dighole has questioned why the state government has not yet acted, noting that prices have already fallen more than 50 per cent below production cost.

The farmers have also demanded that the minimum purchase price be fixed on the basis of actual production costs, and that price deficiency payments (PDP) be credited directly into the bank accounts of affected farmers.

Why prices have crashed

The price collapse has been driven by a convergence of factors. The ongoing conflict in West Asia has disrupted exports to the region that has long been a major buyer of Indian onions.

Simultaneously, exports to Bangladesh — another major market — have slowed sharply. Bangladeshi authorities have cited the need to protect domestic agricultural interests, and Indian traders say repeated and abrupt policy flip-flops on export restrictions from the Indian government in recent years have eroded buyer confidence, making sustained trade commitments difficult.

With export channels weakened on both fronts, surplus supply has flooded domestic markets, further driving down prices.