The government’s defence of export curbs — extended to non-basmati rice, sugar and even de-oiled rice bran, a livestock feed ingredient — is that they are aimed at controlling food inflation and protecting consumers.
Corporates want stability and predictability in government policy. Farmers and agri entrepreneurs also desire it, but are denied the same. The double standards were seen in the May 2022 decision to ban all wheat exports, days after a Union minister spoke of India being ready to feed the world and sending trade delegations to explore new markets for the cereal. More recently, onion exports were, first, in November 2023, not allowed at a floor price below $800 per tonne and, a month later, stopped altogether.
Earlier this month, days before Lok Sabha polls in Maharashtra’s main onion-growing belt, the ban was removed. But the shipments are now subject to both a minimum export price of $550 per tonne plus a 40 per cent duty. Imagine if corporates were to be put through such policy flip-flops. Forget improving the investment climate or ease of doing business, these amount to government-created uncertainty.
The government’s defence of export curbs — extended to non-basmati rice, sugar and even de-oiled rice bran, a livestock feed ingredient — is that they are aimed at controlling food inflation and protecting consumers. This argument, however, ignores the interests of producers, who are mostly farmers with limited lobbying power, except during election time. A Rs 5/kg increase in onion prices may stretch the monthly budget of an average household consuming 5-6 kg by Rs 25-30. But for a grower harvesting 10 tonnes of the bulb per acre, a Rs 5/kg price reduction translates into a revenue loss of Rs 50,000. What is an inflation problem for the consumer is a livelihood issue for the farmer. The latter also does not have the flexibility to switch crops like the former can, by buying less of one and more of another item.
India’s agricultural exports, as an analysis in this newspaper has shown, fell to $48.8 billion in 2023-24 from the record $53.2 billion of the previous fiscal. Much of this decline has been a fallout of the export bans and restrictions imposed in response to food inflation and domestic shortfall concerns. The country needs a new export-import policy balancing the interests of consumers and producers as well as the short- and long-term imperatives of the farm sector.
Controls, even where necessary, should be temporary and rules-based, taking the form of tariffs as opposed to outright bans or quantitative restrictions. The government can also create a buffer stock of all essential commodities to enable market intervention and curb excess price volatility. Ultimately, it needs to realise that building export markets takes time and effort, while undoing that requires just a stroke of the pen. Also, nothing hurts consumers more in the long term than hurting producers.
© The Indian Express Pvt Ltd
First uploaded on: 11-05-2024 at 08:15 IST
