Minimum Export Price on Basmati Rice
Context:
- The government of India is implementing a number of measures to control food inflation as the election draws near. The way these food inflations are managed is starting to affect India’s agricultural exports.
The intriguing instance of Basmati rice’s Minimum Export Price:
- Over the previous five years or so, India has been exporting, on average, 4.5 million tonnes (MT) annually.
- India said that the minimum export price for basmati rice would be $1200 per tonne.
- This is a high-end rice that is exported to the US, some European nations, and the Gulf region. It is enjoyed by the wealthy and upper middle class in India.
- The two main producing states are Punjab and Haryana.
- Typically, the export price ranges from $800 to $1,000 per tonne.
- An MEP of $1,200 effectively restricts a large portion of the export of basmati rice.
Importance of declaring MEP for Basmati rice:
- For traders, exporting the rice loses its competitiveness.
- losing the Basmati rice export business to rival nations like Pakistan.
- Farmer compensation has decreased.
- The urban middle class benefits from cheaper Basmati rice.
Other limiting government policies:
- Broken rice, non-basmati white rice, and parboiled rice are all subject to export restrictions, which might take the form of export tariffs or outright bans.
- export restrictions on wheat, a 40% export tax on onions, etc.
Resulting from such stringent regulations:
- It is commonly known that, with around 40% of worldwide rice exports in 2022–2023, India is the world’s largest rice exporter.
- A significant portion of non-basmati rice is exported to several African nations, who became extremely alarmed upon learning that India was forbidding the export of non-basmati white rice.
- India’s reputation as a Global South leader is damaged by this.
- opposition to the idea of tripling agricultural exports. (India’s agri-exports increased to $43.27 billion in 2013–14 from $8.67 billion in 2004–05, nearly a five-fold increase in just ten years.) If the same pace of growth had continued, agri-exports would have reached $200 billion, but in actuality, they might not even reach $50 billion this year (2023–24).
The 2018 India Agricultural Export Policy’s goals are as follows:
- To achieve a stable trade policy framework and quadruple agricultural exports from the current level of around US$ 30 billion to US$ 60 billion by 2022, with a target of US$ 100 billion in the following years.
- with an emphasis on perishables, to increase high-value and value-added agricultural exports and diversify the export basket and destinations.
- to encourage the export of innovative, native, organic, ethnic, traditional, and non-traditional agricultural products.
- to offer an institutional framework for pursuing market access, removing obstacles, and handling phytosanitary and hygienic concerns.
- Give farmers the chance to profit from export prospects in foreign markets.
India’s stringent agri-export regulations are motivated by:
- favouring domestic customers above farmers is a common urban consumer bias that costs our farmers a lot of money in “implicit taxes.”
- A strategy for the government to combat food inflation and advance agri-export:
- Domestic income policies that solely target the weakest segments of society can assist domestic consumers. As per the NITI’s multi-dimensional poverty threshold, the percentage of people living in poverty is approximately 15%.
- Exports of agricultural products also demonstrate our country’s competitiveness in the global agricultural market and the amount of excess that it can produce.
- Large sums of money must be spent on agricultural R&D, seeds, irrigation, fertilisers, and improved farming techniques like precision agriculture. (India invests about 0.5% of its agri-GDP overall—that is, the combined amount from the Centre and the states—in agricultural research and development.)
- If India is to become a global leader in both agricultural production and agri-exports, it must be doubled right away, if not tripled.
Way Forward:
- Money is not in short supply for either agriculture or consumer food security. However, the way that money is being spent is not ideal. The ability of a country to invent, produce, and sell goods to the global market at competitive rates is a key indicator of its power. For that reason, India’s best course of action should be to increase agricultural R&D and decrease knee-jerk reactions.
