Farm exports: Government can still put curbs on key items; organic, processed ones freed

However, the growth again slowed down to just over 2% to $18.6 billion in H1FY19, trailing a double-digit rise in overall merchandise exports.

The cabinet committee on economic affairs (CCEA) on Thursday approved an agriculture export policy that proposes to keep the outbound shipment of processed and organic items free of any restriction. However, it stopped short of advocating a complete removal of restrictions for all the time on exports of major items — including rice, wheat, cotton and sugar — that witnessed periodical curbs in the past.
The policy aims to drive up farm exports to over $60 billion by 2022 (from around $38 billion in FY18), and help double farm income. Periodic curbs on items ranging from rice to cotton, especially during the UPA years, had stoked uncertainties, shifted buyers to competitors and dented India’s image as a reliable supplier.

Briefing about the CCEA decision, commerce and industry minister Suresh Prabhu said the government would periodically review the demand and supply of essential farm items (which the government doesn’t yet propose to keep free of curbs) and take appropriate trade policy decision. He, however, hinted that there would not be undue fluctuation in policies of these items as well. The government will set up a monitoring mechanism under the commerce ministry to oversee the implementation of the export policy.

Export curbs include the imposition of minimum export price, quantitative limit on shipment, export duty and an outright ban. Analysts have suggested that farm exports must be kept free all the time to make India realise its potential. A predictable export regime is all the more important when the government has announced a 50% premium to farmers over their cost of production, which threatens to inflate domestic prices of several commodities and hurt export competitiveness (although the effect so far has been muted due to limited procurement).

In March, the commerce ministry had released the first draft farm export policy, seeking a stable trade policy regime with limited government interference for key farm items. Reforms in the APMC Act, streamlining of mandi fee and liberalisation of land leasing norms are among the raft of measures suggested in the draft policy.

The government had imposed a ban on exports of wheat in 2007 and on non-basmati rice in 2008 before lifting it in 2011. It has resorted to curbs on onion exports almost every year and periodically slapped restriction on cotton and sugar exports as well. A ban on exports of key pulses and oilseeds was in effect for a long time. In recent years, though, the fluctuations in the farm trade policy have reduced considerably.

Last fiscal, the agri exports reversed a three-year slide to post an over 14% rise to $38.2 billion. However, the growth again slowed down to just over 2% to $18.6 billion in H1FY19, trailing a double-digit rise in overall merchandise exports.

Elaborating on the stable trade policy regime, the policy said given the domestic price and production volatility of certain farm items, there has been a tendency to utilise the policy as an instrument to attain short-term goals of taming inflation, providing price support to farmers and protecting the domestic industry. Such decisions may serve the immediate purpose of maintaining domestic price equilibrium, but they end up distorting India’s image in international trade as a long-term and reliable supplier, it said.


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