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Gulf’s many-layered reaction to India’s new onion export tax

India's onion harvest was hit by poor rainfall, so its government moved to protect domestic supply Shutterstock/Ravi Bhor Photography
India's onion harvest was hit by poor rainfall so its government moved to protect domestic supply
  • India has levied 40% export tax on onions
  • UAE imports 90% of its food
  • Emirates turned to Omani farmers in previous shortages

Omani farmers could be one of the few beneficiaries of India’s decision to impose a 40 percent export duty on onions, while UAE restaurateurs are bracing for another hike in food costs.

India is the world’s biggest exporter of onions, but a lack of rain this summer has affected harvests and prices have already risen by as much as 20 percent over the past month.

Onions are a vital ingredient in Indian cuisine and the price increases come just weeks after restrictions were placed on the supply of rice.

In an attempt to guarantee the supply of onions and control domestic prices, the Indian government introduced an immediate 40 percent duty on exports at the weekend. It will be in force until the end of this year.

Gulf countries rely on India as a supplier of onions and Rayyan Rizvi, managing partner of Dubai-based Yoko Sizzlers, said New Delhi’s decision would have a “significant impact” on Indian restaurants in the UAE.

“Onions are a fundamental ingredient in many of our dishes, and any fluctuations in their price can directly affect our bottom line,” he said.

“In response to this situation, we are actively exploring alternatives to onions from other countries or considering menu adjustments that use them more sparingly.”

Jugal Parekh, managing partner at Yummy Dosa, said Pakistan and Oman could be possible source markets. A similar shortage occurred in 2018 and 2019, and Parekh said this benefited Omani onion farmers as demand from UAE suppliers “increased drastically”.

“Additionally, there will be a slight change in taste and quality of onions,” he warned.

Some UAE restaurant owners were less concerned, saying they had long-term contracts in place that guaranteed prices for key ingredients.

“We still get the same old rates despite any seasonal changes or fluctuating rates,” said Eti Bhasin, owner of the Dhaba Lane Indian restaurant in the Al Karama area of Dubai.

Rice restrictions and food price inflation

Food price rises are having a wider impact, however, and the UAE has banned the export of rice until November.

The ban covers rice of all varieties, including brown rice, fully or partially milled rice and broken rice, the UAE state-run Wam news agency reported in July.

Companies planning to export or re-export rice must place a request with the Ministry of Economy to obtain a permit.

The UAE ban followed the decision by the Indian government to halt exports of non-basmati white and broken rice after heavy monsoon rains led to significant crop damage. It has also restricted exports of de-oiled rice bran until November 30. India accounts for more than 40 percent of world rice exports.

The UAE imports 90 percent of its food. Along with other GCC countries, it has been facing food price inflation since last year.

Restaurateurs in the Emirates were confident about stock levels in the wake of the rice restrictions, but have expressed concern about further price rises.

Yummy Dosa’s Parekh said he was not facing a shortage in supply yet, but prices had increased by about 20 percent.

“We are afraid of a further price hike,” he said.

Sanjay Vazirani, CEO of Indian food company Foodlink, said he had not yet seen any price rises and was confident that the reduced rice supply from India would be an opportunity for other suppliers.

“We believe that with Thailand, Vietnam and Pakistan being major rice producers, there will be no significant disruptions,” he said.

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