Surplus production has kept prices in check, say officials
Ahead of a new minister taking charge, commerce ministry officials have recommended removing the export ban on all agricultural commodities because surplus production has kept domestic prices under check.
At present there is a ban on overseas sale of wheat, non-basmati rice and all pulses, excluding kabuli chana.
“The export ban on agri-commodities should be reviewed, as a sudden knee-jerk reactions would only harm our exporters,” said a senior commerce ministry official.
Exporters, the official added, suffer because money invested in developing new markets goes waste when there is an export ban. As a result, they end up conceding market share to competitors from other countries and domestic firms have to re-invest to recapture lost market share, he said.
Last week, Commerce Secretary G K Pillai said the government may lift an export ban on wheat because the group of ministers (GoM) dealing with this issue had recommended this.
The government had banned the export of wheat in February 2007 and that of non-basmati rice in April last year, to plug a shortage in production and contain a rise in prices. An export duty of Rs 8,000 a tonne on basmati rice exports was levied in March 2008.
Commodity exporters, who have been demanding removal of the export ban, now claim they would not be able to gain even if the ban were revoked because domestic prices, especially of wheat, are higher than international prices.
Industry groups representing exporters, meanwhile, are demanding a subsidy from government to promote exports. But commerce ministry officials say they have not received any representation regarding this.
“Continuity of policy in agri-exports is needed because sudden overseas sale curbs hit exporters who have already booked businesses to develop market access,” said S Dave, Director, Agricultural and Processed Food Products Export Development Authority (APEDA).
Economists are also in favour of removing the ban because of surplus production that leads to higher holding costs for the state-run procurement agencies.
“There is some degree of fungibility between forex reserves and foodgrain. Our reserves have been dipping, which demands that we start exports to build them up,” said Abheek Barua, chief economist, HDFC Bank.
