Editorial: Ill-conceived move

Instead of putting restrictions on exports, the govt should hike MSP for paddy which would aid the food security needs of the country

The Centre’s decision to ban the export of broken rice and impose an additional 20% export duty on non-basmati rice is an ill-conceived move, fraught with adverse implications for the agriculture sector. Instead of putting restrictions on exports, the government should hike the Minimum Support Price (MSP) for paddy which would lead to increased government purchases and aid the food security needs of the country. Contrary to projections, rice prices only accounted for a 2% rise in the consumer price index last month and its prices should not be decreased forcibly. A fall in demand for rice would have a negative impact on the entire economy and farmers and farm labourers would be the worst sufferers. Being the world’s largest exporter of rice, India accounts for a 40% share in the global rice trade of around 50 million tonnes and exports to more than 150 countries, including China. As a result of the ban on export of broken rice and additional export duty, nearly one million tonnes of grain is trapped after rice loading stopped at various ports across India. This is because the buyers are refusing to pay the government’s new 20% export levy on top of the agreed contract price. With this additional duty, Indian rice shipments will become uncompetitive in the world market. Buyers will shift to Thailand and Vietnam. There could be a further escalation in prices which are already rising because of Russia’s invasion of Ukraine.

When India banned rice exports in 2007, global prices shot to new peaks. The present ban comes at a time when farmers stand a chance of reaping the benefits of high international rates of rice. Apparently, the curbs on rice exports are in anticipation of output shortfall due to deficit monsoon rains in Uttar Pradesh, Bihar, Jharkhand and Gangetic West Bengal and also possible yield losses in Punjab and Haryana from a new virus causing ‘dwarfing’ of plants. Rice is the latest in a string of commodities that have faced export curbs this year as governments struggled to raise supplies and fight inflation amid trade disruptions triggered by the Ukraine war. However, it is illogical to prohibit the export of broken rice when there is a huge export market for it. There is no reason to deny the Indian farmer and trader the opportunity for better realisation. And, broken rice usually sells at a huge discount domestically. Knee-jerk responses and ad hocism have been the bane of agricultural policymaking in India. The NDA government has been resorting to the imposition of export bans or stocking controls at the slightest hint of shortages. Poor market intelligence and lack of credible production estimates are the other problem areas that need to be addressed. Policy credibility and transparency are key to the successful functioning of the market economy.

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