The government on Saturday imposed a 40 per cent duty on the export of onions to check price rise and improve supplies in the domestic market as retail inflation in July surged to a 15-month high of 7.44 per cent.

The finance ministry through a notification imposed a 40 per cent export duty on onions with immediate effect, which will be in force till December 31.

The export duty comes amid reports that onion prices are likely to rise in September and there has been a spurt in its exports.

The price of onion is seen as a barometer of the poor man’s affordability and could have implications during the assembly polls in crucial states such as Madhya Pradesh, Rajasthan and Chhattisgarh later this year.

According to the price data available on the website of the department of consumer affairs, the all-India daily average retail price of onion was recorded at Rs 30.72 per kg on Saturday, which is 20.75 per cent higher compared with last year’s rate of Rs 25.44 per kg. A month ago, the all-India daily retail price of onions stood at Rs 27.21 per kg.

Analysts have estimated that it could touch Rs 70 by September end.

Consumer affairs secretary Rohit Kumar Singh said in order to increase the availability of onions in the domestic market, especially in view of the upcoming festival season, the government has decided to impose a 40 per cent duty on the export of onions.

“It was also noticed that there was a sharp rise in exports in the recent past,” Singh said.

The government had always used a minimum export price tool to curb onion exports. However, for the first time this year, export duty has been slapped for effective control of the outward shipment.

The increase in domestic prices of onions coincides with a sharp jump in its exports. According to the trade data available on the department of commerce’s portal, onion exports reached 6.38 lakh metric tonnes during April-June 2023, which is 26.51 per cent higher compared with the 5.04 lakh metric tonnes figure recorded during the corresponding period last year.

The increase in onion exports has been even sharper in June when India exported 2.92 lakh metric tonnes of onions, which is 89.56 per cent higher than 1.54 lakh metric tonnes in the same month last year.