Economic and Policy Implications of the Decision
The economic rationale behind removing the export duty primarily revolves around the interests of onion farmers and exporters. The duty had resulted in suppressed farm gate prices, with onion producers in Maharashtra, Karnataka, and Madhya Pradesh, India’s key onion-growing states, facing financial distress due to reduced demand from international buyers. The removal of the duty is expected to increase farmer incomes and revive export revenues. However, this move also exposes domestic markets to the risk of price inflation, as higher exports could lead to reduced availability and increased costs for consumers.
One of the major criticisms of India’s agricultural trade policy is its unpredictability. The frequent imposition and removal of export restrictions create uncertainty, deterring long-term contractual agreements with foreign buyers. Countries like Bangladesh, a key importer of Indian onions, have repeatedly voiced concerns over India’s inconsistent export policies, prompting them to explore alternative sources such as Pakistan, Egypt, and Turkey. A more stable and predictable trade policy, rather than reactive interventions, would enhance India’s credibility as a reliable agricultural trade partner.
India’s broader trade policies have also faced WTO scrutiny in the past, particularly regarding agricultural subsidies and trade restrictions. The case India – Measures Concerning Sugar and Sugarcane (DS 579, DS 580, DS 581), where Brazil, Australia, and Guatemala challenged India’s export subsidies for sugar, underscores the potential risks of arbitrary trade measures. Although this case concerned subsidies rather than duties, it illustrates how India’s agricultural policies are closely watched by trading partners and can be subject to dispute resolution proceedings. If countries like Bangladesh or Malaysia challenge India’s frequent imposition and removal of onion export restrictions, India may once again find itself having to defend its policies before the WTO.
Additionally, the removal of the duty raises questions about food inflation control measures. While the government argues that domestic stocks are sufficient, past instances have shown that increased exports often coincide with seasonal shortages, leading to price spikes. Given that onions are a politically sensitive commodity in India, with price volatility often influencing electoral outcomes, the government may need to consider alternative stabilization mechanisms. Establishing a strategic buffer stock of onions, akin to the Public Distribution System (PDS) reserves for staple grains, could help mitigate potential price shocks.
Global Trade and Comparative Practices
India’s approach to onion trade regulation stands in stark contrast to the more structured and predictable strategies adopted by other major agricultural exporters. Countries such as Egypt and Pakistan follow a phased export policy, wherein trade restrictions, if imposed, are pre-planned and communicated well in advance to both domestic stakeholders and international trade partners. Egypt, for example, maintains a transparent export licensing system that allows exporters to plan their shipments in accordance with projected domestic supply and demand conditions. Pakistan, another major onion-exporting country, closely monitors production trends and periodically reviews export policies based on the anticipated domestic demand-supply gap, ensuring minimal disruptions in both the local and international markets.
The Netherlands, one of the world’s leading exporters of horticultural products, operates on a market-driven framework rather than abrupt trade restrictions. The Dutch agricultural export model is built on long-term trade agreements, ensuring stable pricing and supply chains. Instead of resorting to sudden tariff barriers or export bans, the Netherlands relies on strategic forecasting and contractual commitments with buyers across Europe and Asia, fostering a reputation as a reliable trading partner. Additionally, the Dutch government supports agricultural resilience through investment in cold chain infrastructure and precision farming, reducing supply fluctuations that could otherwise prompt trade interventions.
In contrast, India’s onion export policy has historically been characterized by frequent interventions that disrupt trade flows. The abrupt imposition and removal of export duties, as seen with the 20% duty introduced in October 2023 and revoked in April 2025, create uncertainty for both domestic producers and international buyers. These reactive trade measures often undermine India’s credibility as a stable supplier in global markets. Countries dependent on Indian onions, such as Bangladesh and Sri Lanka, have frequently faced price volatility and supply shortages due to sudden export restrictions, forcing them to seek alternative suppliers. Bangladesh specifically has repeatedly urged India to provide greater predictability in its agricultural export policies, as disruptions in onion supply have led to sharp price spikes in Bangladeshi markets. Over the past decade, Bangladesh has increasingly diversified its onion imports, procuring supplies from Pakistan, China, and Turkey to mitigate the risks associated with India’s inconsistent trade policies.
Frequent export restrictions also have broader implications for India’s trade reputation. The unpredictability in agricultural export regulations discourages long-term contracts with foreign buyers, making it difficult for Indian exporters to establish steady demand in overseas markets. Unlike countries with structured export policies, where producers can anticipate regulatory changes and adjust their operations accordingly, Indian farmers and traders often face last-minute disruptions that affect pricing and contractual commitments. This uncertainty can push buyers toward alternative markets that offer a more stable and predictable supply chain.
If India aims to maintain its leadership in the global onion trade, it must transition toward a structured, data-driven policy approach. This would involve setting clear and transparent guidelines for export duties and restrictions, aligning trade policies with long-term market trends rather than short-term political and inflationary concerns. Establishing forward-looking trade agreements with major importing nations and investing in supply chain resilience, such as improved storage facilities and logistics, would help mitigate the need for abrupt interventions.
For India to transition toward a structured, data-driven policy approach in onion trade, several key actions are necessary to create a predictable and efficient framework. This shift should focus on both policy development and operational execution, ensuring that all stakeholders, from farmers to international trade partners, have clear and consistent expectations.
A key first step in this process would be the establishment of a National Onion Trade Forecasting Mechanism. This system would integrate data from agricultural ministries, state-level crop reports, export bodies such as APEDA, and meteorological departments to make accurate predictions about harvests and the potential demand for onions. Such a system would utilize advanced analytics to monitor global onion prices, track production trends in other exporting nations, and assess India’s historical export patterns. By forecasting trends in onion supply and demand, India could make better-informed decisions about export regulations, reducing the uncertainty that often accompanies ad hoc policy changes. For example, understanding the cyclical nature of onion production in key growing states like Maharashtra, Karnataka, and Madhya Pradesh could allow the government to adjust export measures in advance, ensuring a balance between domestic availability and international demand.
Moreover, India should shift towards negotiating long-term trade agreements with its major onion-importing countries, particularly Bangladesh, Sri Lanka, and the UAE. These agreements would allow India to set yearly export quotas based on projected domestic supply and demand. By pre-emptively planning exports, India could avoid sudden disruptions and provide its trading partners with the certainty they need to rely on India as a consistent supplier. For instance, including contingency clauses in these agreements could allow for the suspension of exports only in cases of verified domestic shortages, thereby limiting the impact on international markets. Additionally, aligning these trade agreements with quality standards and sanitary and phytosanitary (SPS) regulations would ensure that India’s products meet international expectations, further enhancing trust with its buyers.
A transparent and predictable framework for the imposition of export duties is another essential component. India should introduce clear criteria outlining when export duties would be implemented, based on factors such as domestic price levels, stock availability, and crop forecasts. This policy should also guarantee advance notice, preferably of 60 to 90 days, before any changes to export duties are made. Providing such notice would allow exporters and farmers to plan their operations and minimize the financial disruptions that result from last-minute policy shifts. Additionally, India could establish a regular review process, in which government agencies assess the impact of current export policies and determine whether adjustments are necessary. By publishing these reviews and offering clear justification for any changes, India could increase transparency and create a more predictable environment for all stakeholders involved.
The government should also prioritize investment in infrastructure and logistics to ensure that the onion export system can handle the anticipated demand. India’s existing storage and transportation infrastructure needs significant upgrades to accommodate larger export volumes efficiently. Expanding and modernizing cold storage facilities, particularly in major producing states like Maharashtra and Gujarat, would allow India to maintain a stable supply of onions even during periods of peak domestic production. Efficient transportation and shipping facilities are equally important, particularly at major export hubs such as Jawaharlal Nehru Port (JNPT) and Mundra Port. These ports should be upgraded to handle increased onion shipments without delays, as congestion can significantly impact export timelines and costs. In addition to physical infrastructure, India could also invest in digital platforms that provide real-time market information, allowing farmers, exporters, and policymakers to make decisions based on up-to-date data about market conditions, onion prices, and export demand.
Furthermore, establishing a strategic buffer stock program for onions would ensure that India has a safeguard against domestic supply shocks. Similar to the Public Distribution System (PDS) reserves for staple grains, India could procure and store onions during surplus seasons in major production regions. These buffer stocks would be released during times of domestic shortage, ensuring price stability and preventing sudden spikes that could affect consumers. Having this buffer in place would also provide the government with greater flexibility in managing exports, as it could better control the balance between domestic needs and export commitments.
Finally, India should prioritize research and development (R&D) in onion production to reduce the volatility associated with supply. Investing in the development of hybrid onion varieties that are more resistant to weather fluctuations, pests, and diseases would increase the resilience of onion production across the country. Moreover, adopting sustainable farming practices, such as water-efficient irrigation and low-input farming techniques, could reduce production costs and enhance yields. Educating farmers through extension services would further improve practices across the country, ensuring that production remains stable even during adverse conditions.
By implementing these measures, India can create a more stable and predictable environment for onion trade. A data-driven, structured approach would allow the country to better manage supply and demand, reduce volatility in domestic prices, and strengthen its reputation as a reliable global supplier. At the same time, it would mitigate the adverse effects of sudden policy shifts on both domestic and international markets. As India moves toward more transparent and forward-looking trade policies, it will be better equipped to balance the interests of producers, consumers, and international partners, ultimately enhancing its position in the global agricultural market.
Conclusion
The removal of the 20% export duty on onions represents a pivotal shift in India’s trade policy, carrying complex and far-reaching economic, legal, and geopolitical ramifications. On one hand, the move bolsters the interests of exporters and onion farmers by restoring India’s competitiveness in global markets, potentially reversing the decline in outbound shipments that followed the imposition of the duty. On the other hand, it heightens the risk of domestic price volatility, potentially straining household budgets and increasing inflationary pressures on a commodity that has historically been politically sensitive in India. The decision is emblematic of India’s broader pattern of reactive trade interventions, where policy measures are implemented in response to short-term domestic pressures rather than being embedded within a structured, long-term strategic framework. This lack of predictability not only disrupts supply chains but also diminishes India’s reliability as a stable trading partner, raising concerns among importing nations that have frequently been affected by abrupt export restrictions.
To ensure a more balanced and sustainable approach to agricultural trade, India must prioritize policy consistency and strategic planning over ad hoc interventions. Strengthening the institutional framework for trade decision-making, integrating robust market intelligence tools to forecast supply-demand trends, and establishing transparent mechanisms for export restrictions and duties will be critical in enhancing India’s credibility in global markets. Additionally, the creation of a strategic buffer stock for onions—akin to the mechanisms in place for staple grains, could help mitigate price shocks and provide greater flexibility in managing both domestic supply and export commitments. Long-term trade agreements with key importers, clear guidelines on when and how export controls can be imposed, and improved cold storage and logistics infrastructure are equally necessary to avoid the disruptions that frequent policy reversals create.
Moving forward, India must transition from reactionary trade policies to a structured, data-driven, and rules-based trade framework. This shift is essential not only to protect the interests of farmers and consumers but also to uphold India’s standing as a responsible and reliable player in the global agricultural trade landscape. A well-calibrated trade policy that balances domestic price stability with international commitments will not only reinforce India’s credibility among trading partners but also ensure that its agricultural sector remains resilient and globally competitive. By adopting a forward-looking approach, India can prevent cyclical trade disruptions, foster greater investor confidence, and secure its place as a dominant and trusted supplier in the global onion market.
(This post has been authored by Tejas Hinder, an associate at Cyril Amarchand Mangaldas and an editor at TCLF)
CITE AS: Tejas Hinder, ‘INDIA’S REMOVAL OF 20% EXPORT DUTY ON ONIONS: A CRITICAL TRADE LAW AND POLICY ANALYSIS: Part II’ (The Contemporary Law Forum, 31 March 2025) <https://tclf.in/2025/03/31/indias-removal-of-20-export-duty-on-onions-a-critical-trade-law-and-policy-analysis-part-II/>date of access.