India scraps onion tax as prices soar

The Indian government, facing mounting public anger over soaring onion costs, on Wednesday scrapped tax on imports of the vegetable to try to rein in prices of a staple ingredient.

The move comes after Premier Manmohan Singh expressed "deep concern" over the cost of onions doubling in a matter of days and called for steps to lower prices of what is normally one of the cheapest vegetables.

Onions are selling for Rs80 a kilogramme (approximately Dh7) after a price surge from Rs35 to Rs40, and stories about the increase have become front-page news.

Indian authorities are mindful that onions can be a potent political issue, with voters in 1998 throwing out the Hindu nationalist Bharatiya Janata Party (BJP) in Delhi state polls after a sharp surge in onion prices.

The so-called "onion factor" also helped defeat the left-leaning, now defunct Janata Party in 1980 parliamentary elections when prices went up quickly.

The government, which is battling to curb inflation, has already banned the export of onions but has warned prices will stay high for several weeks due to unseasonal rains in western India's onion-growing region.

Authorities also say traders hoarding onions are driving up prices and starting to make the vegetable unaffordable for India's poor, for whom it is an essential ingredient to add taste to food.

"Disturbing allegations that hoarding in some onion-producing states have officialdom's blessings demand probing and, if needed, tough punitive action," said the Times of India in its editorial on Wednesday.

"It's scandalous that prices frequently soar while farm produce rots for lack of infrastructure," it added.

Onions are being trucked in from neighbouring Pakistan, where they cost a fifth of the price, in a bid to meet domestic demand.

"The customs duty on onions has been brought down to zero," Finance Secretary Ashok Chawla told reporters in New Delhi.

The government has also asked state-run cooperative stores to sell onions at wholesale rates of Rs35 to Rs40 a kilo to cool prices.

The spike in onion prices comes as overall food inflation runs at nearly 10 per cent, causing huge hardship for India's impoverished millions.

The government has been feeling the heat over inflation as the opposition BJP has seized on the issue to galvanise its fortunes.

Follow Emirates 24|7 on Google News.