Onion exports: How Pakistan briefly won at India’s expense in an unlikely clash | Business and economic news

Islamabad, Pakistan – Pakistani onion growers and exporters are celebrating a windfall due to an unprecedented surge in exports over the past few months, an unlikely victory at the expense of their counterparts across the border in India.

The nations of South Asia, rivals in numerous areas, are also major onion producers. But India is also the world’s second largest exporter of onions, after China, and is a dominant force in the global market for this vegetable, with its production often excluding onions from smaller countries.

So in December, when India imposed an export ban due to a decline in local onion production ahead of national elections, Pakistani farmers and exporters seized what they recognized was a rare opportunity. In 2023, India exported almost 2.5 million tonnes of onions. Suddenly, the global onion market had a gap – which Pakistan partially filled.

Pakistan managed to export more than 220,000 tons of onions between December and March this year, which was a little more than its usual annual onion export volume.

Waheed Ahmed, patron-in-chief of the Pakistan Fruit and Vegetable Exporters, Importers and Traders Association (PFVA), attributed this success to quick thinking – and the government’s willingness, at least for a while, to allow exports without bans similar to the from India.

“When India imposed the ban, we urged the government to allow us to seize the opportunity and through our timely action, we were able to earn more than $200 million in revenue for the country,” Ahmed told Al Jazeera.

The Pakistani government ended up imposing restrictions on onion exports, as the withdrawal of production meant an increase in domestic prices. But exports already underway through agreements approved before the restrictions were expected to generate an additional $50 million in revenue by the end of the fiscal year in June, Ahmed said.

On the other hand, Ahmed said, the country typically earns between $110 million and $150 million a year from onion exports. Last year, the country managed to earn over 235 million dollars in total from vegetable exports, with onion exports contributing around 90 million dollars.

Domestic shortages and rising prices

For Pakistan, which has faced a desperate economic situation over the past two years, exports have brought in much-needed foreign reserves. Data from the country’s central bank showed that foreign exchange reserves, which were as low as $3 billion last year, recovered to $9 billion this month, enough to cover imports for six weeks.

However, like onions, the feel-good story is multi-layered. The success of Pakistan’s onion exports resulted in a shortage of onions in the domestic market for a few months.

With more than 220,000 tonnes of the harvest being sent abroad, the availability of onions for local consumption declined, pushing prices up between December and April, a period when Indian onions were barred from export, hitting ordinary Pakistanis hard. .

In the first four months of the year, onion prices, normally 50 to 80 rupees ($0.18 to $0.29) per kilogram, rose to 250 to 350 rupees ($0.90 to $1.26) per kilogram, before gradually falling in May.

“Onions are a staple in our daily meals,” Sumaira, a domestic worker from Islamabad who goes by one name, told Al Jazeera. “But with everything else getting more expensive, the rising price of onions only adds to the burden,” she said.

Hamid Baloch, who hails from Pasni in the southwestern province of Balochistan but currently works as a chef at a cafe in Islamabad, said the rise in onion prices has had an impact on his business both in terms of production and sales costs.

“We bought in bulk and a 5 kg bag of onions cost 1,500 to 1,800 rupees [$5.39 to $6.47] before starting to fall this month. It is now available for around 500 rupees [$1.50],” the 25-year-old told Al Jazeera as he chopped onions for the chicken curry he was preparing.

According to the World Bank, more than 39% of Pakistanis earn less than 3.5 dollars a day, and one of them is Muhammad Azam.

A daily wage worker in Islamabad, Azam said the rising cost of living meant people like him struggled to afford basic needs.

“My kids and I can’t even think about eating chicken more than once every two months. All we have are pulses and vegetables like onions or tomatoes, but in the last few months, even these were almost impossible to buy,” he said.

However, he acknowledged that in recent weeks we have seen a downward trend in prices not only for onions but also for other items.

God’s gift of opportunity

Inflation data and exporters agree with the reduction in onion prices.

Government figures showed that inflation, which reached an all-time high of more than 38 percent in May last year, continued its downward trend, with the inflation figure for May 2024 recorded at 11.8 percent.

According to Imtiaz Hussain, a fruit and vegetable exporter in Karachi, the drop in the price of onions was due to the Indian government reversing its export ban.

“In early May, the Indian government reopened its onion exports and markets in the Gulf region and some Far Eastern countries, where we were able to sell, returned to source their onions from India,” he told Al Jazeera.

Ahmed, the PFVA head, said exporters and farmers demonstrated “common sense and opportunism” to export as many onions as they could during the short period of time when the government restricted onion exports in March.

“Our objective was to continue exporting without causing significant shortages in the domestic market,” he stated.

Countering the inflated onion prices, Ahmed said the increase was due to retailers exploiting customers and blaming exporters.

“In our wholesale markets, onions were continually available for less than 150 rupees ($0.54) per kilogram, so why should we take the blame if retailers sell them for more than 300 rupees? That’s up to the government, not us,” he said.

For Ahmed, the opportunity to earn foreign exchange was a balancing act after 2022, when floods have destroyed large crops, including onions, in southern parts of Pakistan, causing immense devastation to farmers.

“We suffered from the flood, but this opportunity was a gift from God. If farmers earn from one harvest, they will invest more in the next harvest. We just need to work on training our farmers to learn better modern agricultural practices in order to increase their yield and income.”