The Indian government on Saturday imposed a 40 percent additional duty on the export of onions ‘to check price rise and improve supplies in the domestic market’, sending distress signals in Nepal and other countries in the neighborhood that have been grappling with rising inflation, food inflation in particular. As per the Nepal Rastra Bank’s annual report released on Aug 18, annual average inflation remained 7.74 percent. 

“This notification shall come into force with immediate effect, and will remain in place till 31 Dec, 2023,” reads the Finance Ministry notification. The export duty comes amid reports that onion prices are likely to rise in September.

Media reports quoted Consumer Affairs Secretary Rohit Kumar Singh as saying that the step is meant to improve the domestic availability of onions and contain the price rise.

The move comes amid the Narendra Modi government’s plans to keep a buffer stock of three lakh tonnes of onions for the 2023-24 season against 2022-23’s buffer stock of 2.51 lakh tonnes.

The Indian government has already imposed restrictions on the export of wheat and rice after reducing import duty on edible oils as part of its effort to provide relief to the people.

The export tax is expected to increase prices in countries like Nepal, which depend on Indian onions that cost around Rs 65 per kg in the Kalimati fruits and vegetable market before the tax surge.

With the government of Nepal already imposing a 13 percent value added tax on onions, the price of onions is almost certain to go further up after the Indian move. 

“As Nepal is dependent on India for onions, the latest export duty hike will increase onion prices in the domestic market also. The hike has taken effect from Saturday night, meaning fresh consignments enter Nepal with a hiked price. We don’t have domestic production, so the onion price in Nepal will include the hiked export tax,” says Binay Shrestha, information officer at Kalimati fruits and vegetable market.

Recent days have also seen tomato prices shoot up in Nepal, with the prevailing scarcity in India pushing tomatoes across the border, as if rising prices of rice and wheat were not enough.

With the rise in the prices of onions, tomatoes, rice and wheat along with petroleum products that fuel transportation, the Nepali kitchens are becoming more and more expensive to run.