Onions suddenly became pricier after India slapped a minimum export price to check shipments, and ensure adequate supplies for its domestic consumers.

Nepal gets almost all of its onion requirement from the southern neighbour, and any ripple there is amplified when it reaches Nepali bazaars.

On Sunday, the wholesale price of onion jumped by 60 percent to Rs122.50 per kg

from Rs75 per kg previously. Householders were paying Rs150 retail for the pungent bulb, which is indispensable in Nepali kitchens.

Market analysts say the price may breach the November 2019 record of Rs250 per kg if fresh harvests are delayed in India.

The Indian government on Saturday imposed a minimum export price of $800 per tonne till December 31 to maintain sufficient availability of onion to domestic consumers at affordable prices.

The minimum export price is imposed for all varieties of onion except Bangalore Rose and Krishnapuram onions; and for cut, sliced, or broken in powder forms, according to the notification of the Directorate General of Foreign Trade, India.

In India, the average retail price of onion shoots up by 57 percent to IRs47 per kg on Monday due to the low production.

The Kalimati Fruits and Vegetable Market had fixed the wholesale price of onion at Rs107 per kg on Sunday. The price swelled to Rs120 on Monday.

According to Indian media reports, a delay in the monsoon onion sowing period due to weather reasons resulted in less coverage and late arrival of the crop. There is a tight supply situation in India, which resulted in price increases.

Nepal has experienced a decrease in supply of the essential vegetable after India imposed the minimum export price.

According to officials at the Kalimati fruit and vegetable market, Nepal received 63 tonnes of onions on Monday, down from 100 tonnes last week. The Kalimati market is the largest wholesale market for fresh produce in the country.

“The Indian government's move to impose the minimum export price on onion has largely impacted Nepali consumers amid the festive season,” said Binay Shrestha, information officer at the Kalimati Fruits and Vegetable Market Development Board.

The price of onion is also high in India.

“The combined effect of India’s new export policy and the Nepal government's imposition of VAT on onion from mid-July has sent prices soaring,” said Shrestha.

“These days, traders are hesitating to import onion due to the fluctuating rates. We are not sure to what level the price will increase in Nepal,” he said.

Before the minimum export price, India had imposed a 40 percent export duty on onion.

The duty imposed by the world’s biggest exporter of onions is aimed at dampening local prices ahead of key state elections.

In Nepal, potatoes, onions and other daily consumable farm products are supposed to be exempt from VAT under the Tax Act of 1996. But the government amended the law through the Financial Bill 2023 and removed 170 goods from the tax-free list in the current budget.

Nepali consumers pay taxes totalling 23.5 percent on potatoes, onions and other vegetables, fruits and food items—9 percent agriculture service charge, 1.5 percent advance tax and 13 percent VAT.

“The price will come down once new Indian onions start arriving next month,” said Mohan Baniya, president of the Potato-Onion Import-Export and Wholesaler Association.

“There is no problem in supply as onion shipments are arriving normally. There will be no shortage,” he said.

According to the Department of Customs, Nepal imported 180,190 tonnes of onions worth Rs6.75 billion from India in the last fiscal year.

The onions sold in Nepal come mainly from Nashik, Indore, Kanpur and Gujarat in India. Nepal depends on imported onions as domestic production is negligible.

China is another source of onions for Nepal, but the Chinese product is mostly used for making salads, mainly in hotels and restaurants.

In November 2019, the price of onion hit a new high of Rs250 per kg in Kathmandu Valley after India slapped a ban on onion export in September of the same year to maintain domestic availability.

The ban caused severe shortages of onions all over Asia including Nepal. The embargo was lifted in March 2020. India again stopped onion exports from September 2020 to January 2021.