DHAKA/MUMBAI (Reuters) - Onion prices in Bangladesh have doubled over the past two weeks after floods ravaged the crop and as imports from top supplier India became expensive after New Delhi withdrew incentives for overseas sales, industry officials told Reuters.
A man works at an onion wholesale market in the Kawran Bazar in Dhakaa, Bangladesh, July 24, 2019. REUTERS/Mohammad Ponir Hossain
Onions are used as the base for traditional dishes across Asia such as biryani in Pakistan and India, belacan in Malaysia and fish curry in Bangladesh.
Prices in Bangladesh doubled to 50 taka ($0.59) per kg because of floods and traders say they could rise further ahead of the Eid-ul-Adha festival in August, when demand usually goes up for the vegetable.
“The upward trend due to supply shortage could continue over the next few months,” said Dhaka-based trader Hazi Shahid, adding the country has to raise imports from India to calm prices.
Severe flooding has killed at least 61 people, displaced nearly 800,000 and inundated thousands of homes across one-third of Bangladesh, government officials said on Tuesday, after two weeks of heavy monsoon rains.
The price rise has become a headache for the government of Bangladesh Prime Minister Sheikh Hasina, which may plan sales of subsidized onions through the state-run Trading Corporation of Bangladesh (TCB).
“The price hike is like a nightmare for me. If prices of onions don’t come down soon, we’ll start selling in the open markets through the TCB,” Commerce Minister Tipu Munshi said.
Indian supplies have fallen after New Delhi discouraged exports.
India withdrew 10% export incentives on onion in June after the prices of the bulb jumped 47% in a month in the local market due to dwindling supplies.
As the subsidy has been withdrawn, Indian exporters have to charge more for overseas sales, said Ajit Shah, president of the Mumbai-based Onion Exporters’ Association.
Even in India supplies are limited and the planting of summer-sown crops has been delayed in some areas due to low rainfall, Shah said.
India’s monsoon rains to date have been 19% below average since the season began on June 1, according to the India Meteorological Department.
India exported 2.2 million tonnes of fresh onions in the 2018/19 fiscal year ended on March 30.
During the same time, Bangladesh imported 578,111 tonnes of onions from India, according to data compiled by India’s Agricultural and Processed Food Products Export Development Authority.
Onion prices in Bangladesh are unlikely to come down unless prices fall in India with a bumper production, said an exporter based in Kolkata, adding, however, that the “Indian crop is not looking great due to uneven distribution of monsoon rains.”
![Questions
1. How did the flood affect onion production? Can you show the change in equilibrium
price and quantity with a diagram?
2. How did an export ban on onion by India affected the price of local onion in Bangladesh?
Can you show this change/ effect on a diagram?
3. If demand for local onion increases during Eid (in future) what changes do you see in the
above diagram (from question 2)? Will the supply curve be affected or the demand curve
for local onion?
4. If less rainfall limited the supply of Indian onion production, how will it change the
equilibrium price in the Indian market?
5. If Indian Government reduces export incentive, how will it affect/change demand or
supply of onion in India in the free market? Show with a diagram.
6. Onion prices in Bangladesh are unlikely to come down unless prices fall in India with a
bumper production. What can we do to reduce the onion price in BD? Is there a role of
the government?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1e7ecf7c-bf08-47f6-903b-0a6b18ace195%2F12e44b2b-2c62-4c57-95fc-1c562a35d254%2Fnhiisc_processed.jpeg&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![Essentials of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337091992/9781337091992_smallCoverImage.gif)
![Exploring Economics](https://www.bartleby.com/isbn_cover_images/9781544336329/9781544336329_smallCoverImage.jpg)
![Essentials of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337091992/9781337091992_smallCoverImage.gif)
![Exploring Economics](https://www.bartleby.com/isbn_cover_images/9781544336329/9781544336329_smallCoverImage.jpg)