Onion politics

To export or not to export onion through the Wagah border had become another controversial subject between India and Pakistan. Many may consider this of inconsequential importance, given the range of the rather ticklish issues between the two countries, including the elusive Kashmir issue, the Siachen dispute, the routine allegations of Pakistani involvement in terror-related acts in India and last but not least, the very grave water dispute that would leave large tracts of Pakistan dry.
With the international community adopting a hands-off policy with respect to Kashmir and Siachen, ignoring routine Indian human rights violations in Kashmir while proactively seeking lucrative trade deals, accusing Pakistan of not doing enough to stave off terror attacks that are allegedly planned in this country and urging better water management policies by Pakistan as a solution to the water dispute, there is a real concern at the level of our officialdom that the Indians may be supported even in the context of the onion controversy. There is a merit to this argument.
Pakistan allowed the export of onion to India in the wake of a severe shortage of the commodity in the Indian market through the land route, the Wagah border, in addition to the trade already allowed through the sea route. What the government failed to forecast is the impact of this decision on the domestic price of this item - from 40 to 80 rupees per kg.
Given that our government has been unable to make accurate forecasts in the economic arena on a range of issues, this latest failing surprised no one. However, in deference to local sentiments, given that onion is to the Pakistani cuisine what electricity is to industrial productivity, the government hastily stopped its exports to India through the land route, while the sea route remained open for such exports. This time the government met with success and its price in the local market plummeted to the acceptable 40 rupees per kg.
India registered a strong protest maintaining that contractual obligations were violated when the government summarily stopped onion exports through Wagah. However the Pakistanis could easily have pointed out that the exports of onion through the sea route, which would have considerably raised the cost for India, were still allowed.
There was also talk of India's decision to violate its contractual obligations to Pakistan recently when it stopped Indian cotton exports to Pakistan, subsequent to contractual arrangements having been made. However, such arguments are now academic as the government has agreed to allow export of onion through Wagah, L/Cs for which were opened up to 5 January this year.
If market sentiment leans towards the perception that the exports are not substantial enough to have any impact on domestic prices, then this latest decision would be considered a good one as it would allow exporters to meet their international contractual arrangements while not impacting negatively on domestic prices.
If on the other hand the wholesalers and retailers consider this period as a golden opportunity to realise windfall profits then this decision taken by the government would have a public backlash. Given our retail and wholesale sector's penchant for making windfall profits through engaging in such illegal activities as hoarding, analysts are reluctant to forecast a stable onion price in the local market after the recent government decision.
This is especially so in the context of the unavailability of exact figures of total exports that would be allowed through Wagah. According to news reports, 400 trucks of onion were loaded at the time the government stopped exports through Wagah, while the Federal Board of Revenue has confirmed only 70 trucks. In this context it is important for the State Bank of Pakistan to double check the figures and release them to ensure that the government's revised policy on onion exports to India through Wagah is adhered to in letter and in spirit.