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Thursday, 23 August 2018 00:00
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Nothing short of removing all restrictions will do the trick

 

The commerce ministry, this newspaper has reported, is in favour of removing as many hurdles as possible for India’s exports of agriculture, and keeping the restrictions to just a few items that are critical to the country’s food security. So, if in the past, the government would put export restrictions on exports of onions, potatoes and even dairy exports, the plan is that these will be completely freed up. This is important for several reasons. Given the Icrier analysis by Ashok Gulati and Shweta Saini shows India is export-competitive in most agriculture produce, this can boost overall exports. And once export markets develop, farmers get a steady source of income and, as a result of this, even farm output rises. Indeed, government restrictions have played a big role in curbing India’s agriculture exports. In the case of wheat, for example, there was an export ban from February 2007 to September 2011 and, after the ban was lifted, wheat exports rose to over $5 billion in 2012-13. In the case of rice, a host of restrictions by way of minimum export prices were imposed between 2007 and 2011 and this even lowered local prices—before the ban, between 2004-05 and 2007-08, domestic prices were about 80-90% of world reference prices but this fell to 70% during the ban period.

While the plan is welcome, the commerce ministry is being too timid; export restrictions need to be removed for all produce, for all time to come. The ministry wants to have the ability to impose export restrictions on crops like wheat and rice should the local price rise too much. But, once there is a lucrative export market, domestic supplies will also pick up as farmers will grow more in anticipation of better revenues. Also, since the Food Security Act, in any case, envisages giving two-thirds of the country 5 kg per month of wheat and rice subsidised at just a tenth of the cost, it really doesn’t matter if prices rise for the rest of the population. And should the rise for the richer segment of the population be exceptionally high, the government can always dump these crops into the market from its ballooning stocks—these stocks will rise even more now that the government has promised farmers it will ensure they always get the MSP for each crop—and ensure market prices cool down. It is indeed odd that, with all these safeguards in place for consumers, a government that wants to be seen as pro-farmer is unable to come up with the right policy.

 

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