Destroying farm exports

Instability in govt policy hurts producers and consumers

Stability is not the hallmark of the Indian government’s trade policies. This is true particularly of trade in agricultural products, which is switched on or switched off frequently — often at inappropriate times. The slew of recent decisions regarding the liberalisation of exports of agricultural commodities, such as sugar, cotton, onion, milk casein and staple cereals like wheat and rice, provides ample evidence of this. Curiously, most of these decisions were taken not by the ministries concerned, but by groups of ministers (GoMs) or at a still higher level. Such an ill-conceived approach towards exports helps neither to gainfully tap the global market to fetch better prices, nor to steady domestic commodity markets. Even an administrative decision like doing away with the minimum export price (MEP) for onion was taken at a meeting chaired by the prime minister. Similarly, lifting the export ban on a minor product like casein – a form of milk protein used as dietary supplement and for making cheese – had to wait for ages, until a GoM was ready to take a call on it.

One of the most detrimental repercussions of decision paralysis of this kind is that the ideal opportunities to tap the global bazaar are almost invariably missed. Take, for instance, the unshackling of sugar exports, a step that was overdue, given sugarcane output has consistently provided surpluses. Exports were allowed only in dribbles at first, and were freed up only when international prices fell to their lowest level of the year. In fact, a further price slide is not being ruled out, in view of the anticipated arrival of the latest harvest in Brazil, the world’s largest sugar producer. The domestic sugar industry is saddled with high inventories and sugarcane price arrears have mounted to over Rs 10,000 crore, hurting cane growers severely. The for onions, too, has been raised at a time when it is unlikely to benefit onion growers, as they have already disposed of their main kharif produce. And, of course, cotton exports were liberalised only after several hiccups that dented importers’ faith in the reliability of supplies from India. China, the largest importer of Indian cotton, is reportedly now looking towards the United States and other such more dependable cotton-producing nations.

In the milk sector, which is also going through a productivity boom, exports have been liberalised only for casein, though the actual need is to ship out skimmed milk powder, to trim the mounting inventories. Indeed, the list of such mistimed and misdirected trade moves seems unending, including even cereals like rice and wheat. Though their production and procurement have outstripped requirements for several years now, causing an unprecedented glut and acute scarcity of storage space, the decision to export was needlessly held back until international prices began to soften. As a result, wheat exports have lost much of their profitability, and non-Basmati rice exports are possible only to nearby destinations — and that too has been possible because of the weakening of the rupee. The government should have learned from all these errors that it would do better to stop making heavy weather of farm exports. It is better to leave them to the markets than to infrequent and inefficient GoMs.

image
Business Standard
177 22
Business Standard

Destroying farm exports

Instability in govt policy hurts producers and consumers

Business Standard  |  New Delhi 



Stability is not the hallmark of the Indian government’s trade policies. This is true particularly of trade in agricultural products, which is switched on or switched off frequently — often at inappropriate times. The slew of recent decisions regarding the liberalisation of exports of agricultural commodities, such as sugar, cotton, onion, milk casein and staple cereals like wheat and rice, provides ample evidence of this. Curiously, most of these decisions were taken not by the ministries concerned, but by groups of ministers (GoMs) or at a still higher level. Such an ill-conceived approach towards exports helps neither to gainfully tap the global market to fetch better prices, nor to steady domestic commodity markets. Even an administrative decision like doing away with the minimum export price (MEP) for onion was taken at a meeting chaired by the prime minister. Similarly, lifting the export ban on a minor product like casein – a form of milk protein used as dietary supplement and for making cheese – had to wait for ages, until a GoM was ready to take a call on it.

One of the most detrimental repercussions of decision paralysis of this kind is that the ideal opportunities to tap the global bazaar are almost invariably missed. Take, for instance, the unshackling of sugar exports, a step that was overdue, given sugarcane output has consistently provided surpluses. Exports were allowed only in dribbles at first, and were freed up only when international prices fell to their lowest level of the year. In fact, a further price slide is not being ruled out, in view of the anticipated arrival of the latest harvest in Brazil, the world’s largest sugar producer. The domestic sugar industry is saddled with high inventories and sugarcane price arrears have mounted to over Rs 10,000 crore, hurting cane growers severely. The for onions, too, has been raised at a time when it is unlikely to benefit onion growers, as they have already disposed of their main kharif produce. And, of course, cotton exports were liberalised only after several hiccups that dented importers’ faith in the reliability of supplies from India. China, the largest importer of Indian cotton, is reportedly now looking towards the United States and other such more dependable cotton-producing nations.

In the milk sector, which is also going through a productivity boom, exports have been liberalised only for casein, though the actual need is to ship out skimmed milk powder, to trim the mounting inventories. Indeed, the list of such mistimed and misdirected trade moves seems unending, including even cereals like rice and wheat. Though their production and procurement have outstripped requirements for several years now, causing an unprecedented glut and acute scarcity of storage space, the decision to export was needlessly held back until international prices began to soften. As a result, wheat exports have lost much of their profitability, and non-Basmati rice exports are possible only to nearby destinations — and that too has been possible because of the weakening of the rupee. The government should have learned from all these errors that it would do better to stop making heavy weather of farm exports. It is better to leave them to the markets than to infrequent and inefficient GoMs.

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Destroying farm exports

Instability in govt policy hurts producers and consumers

Stability is not the hallmark of the Indian government’s trade policies. This is true particularly of trade in agricultural products, which is switched on or switched off frequently — often at inappropriate times. The slew of recent decisions regarding the liberalisation of exports of agricultural commodities, such as sugar, cotton, onion, milk casein and staple cereals like wheat and rice, provides ample evidence of this. Curiously, most of these decisions were taken not by the ministries concerned, but by groups of ministers (GoMs) or at a still higher level. Such an ill-conceived approach towards exports helps neither to gainfully tap the global market to fetch better prices, nor to steady domestic commodity markets. Even an administrative decision like doing away with the minimum export price (MEP) for onion was taken at a meeting chaired by the prime minister.

Stability is not the hallmark of the Indian government’s trade policies. This is true particularly of trade in agricultural products, which is switched on or switched off frequently — often at inappropriate times. The slew of recent decisions regarding the liberalisation of exports of agricultural commodities, such as sugar, cotton, onion, milk casein and staple cereals like wheat and rice, provides ample evidence of this. Curiously, most of these decisions were taken not by the ministries concerned, but by groups of ministers (GoMs) or at a still higher level. Such an ill-conceived approach towards exports helps neither to gainfully tap the global market to fetch better prices, nor to steady domestic commodity markets. Even an administrative decision like doing away with the minimum export price (MEP) for onion was taken at a meeting chaired by the prime minister. Similarly, lifting the export ban on a minor product like casein – a form of milk protein used as dietary supplement and for making cheese – had to wait for ages, until a GoM was ready to take a call on it.

One of the most detrimental repercussions of decision paralysis of this kind is that the ideal opportunities to tap the global bazaar are almost invariably missed. Take, for instance, the unshackling of sugar exports, a step that was overdue, given sugarcane output has consistently provided surpluses. Exports were allowed only in dribbles at first, and were freed up only when international prices fell to their lowest level of the year. In fact, a further price slide is not being ruled out, in view of the anticipated arrival of the latest harvest in Brazil, the world’s largest sugar producer. The domestic sugar industry is saddled with high inventories and sugarcane price arrears have mounted to over Rs 10,000 crore, hurting cane growers severely. The for onions, too, has been raised at a time when it is unlikely to benefit onion growers, as they have already disposed of their main kharif produce. And, of course, cotton exports were liberalised only after several hiccups that dented importers’ faith in the reliability of supplies from India. China, the largest importer of Indian cotton, is reportedly now looking towards the United States and other such more dependable cotton-producing nations.

In the milk sector, which is also going through a productivity boom, exports have been liberalised only for casein, though the actual need is to ship out skimmed milk powder, to trim the mounting inventories. Indeed, the list of such mistimed and misdirected trade moves seems unending, including even cereals like rice and wheat. Though their production and procurement have outstripped requirements for several years now, causing an unprecedented glut and acute scarcity of storage space, the decision to export was needlessly held back until international prices began to soften. As a result, wheat exports have lost much of their profitability, and non-Basmati rice exports are possible only to nearby destinations — and that too has been possible because of the weakening of the rupee. The government should have learned from all these errors that it would do better to stop making heavy weather of farm exports. It is better to leave them to the markets than to infrequent and inefficient GoMs.

image
Business Standard
177 22

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