Not Quite Jai Kisan – Exports restrictions

Source– The post is based on the article “Not Quite Jai Kisan” published in “The Times of India” on 28th August 2023.

Syllabus: GS3- Agriculture

Relevance: Agriculture pricing and marketing

News– GOI has tightened restrictions on basmati exports. A minimum price for exports has been fixed at $1,200 per metric tonne. A contract below the floor price will be evaluated by a GOI committee for clearance.

In July, exports of non-basmati white rice were prohibited. On August 25, GOI imposed a 20% export duty on parboiled rice.

What is the justification provided by the Indian government for this move?

It is meant to prevent exporters circumventing rice export bans by misclassifying the product as basmati.

Global rice prices are increasing. The FAO rice price index reached its highest level in July 2023 since September 2011.

India has maintained its position as the world’s largest rice exporter for more than a decade. In terms of quantity, India’s rice exports are predominantly non-basmati varieties.

What are issues related to government restrictions on basmati exports?

Indian farmers are facing an earnings limitation during a time when global supply and demand dynamics are in their favour.

GOI’s efforts to manage domestic food inflation are understandable. Controlling inflation is crucial for maintaining India’s overall macroeconomic stability.

However, this objective need not come at the detriment of farmers. The current approach creates a situation where gains for consumers come at the expense of farmers.

Way forward-

GOI can purchase agricultural products that have been singled out for export restrictions or bans at an export parity price. The acquired stock could then be released into the market to stabilise prices.

This approach may incur a fiscal cost. But any temporary financial implications can be balanced through savings achieved in other areas.

Adopting export parity prices has long-term advantages. Limiting farmers’ income during prosperous years can hinder their willingness to support agricultural reforms.

If farmers are uncertain about policy stability, persuading them to embrace reforms becomes challenging.