Basmati export duty to benefit Pak farmers

It is estimated the export duty on basmati will transfer Rs 30 billion worth of Indian farm income to Pakistani farmers.

Last week, the government imposed an export duty of Rs 8,000 a tonne on basmati rice exports, to discourage the shipping. It also lowered the minimum export price (MEP) from $1,200 to $1,000 a tonne.

 

In March, the government withdrew the duty entitlement passbook (DEPB) scheme benefits on basmati rice export apart from raising the MEP from $1,100 to $1,200 a tonne.

The country exports over 80 per cent of the 1.6 million tonnes basmati that it grows. Export of the commodity stood at 1.045 million tonnes worth Rs 2,792 crore in 2006-07. In the April-November period of 2007-08, 6,48,231 tonnes of basmati rice, valued at Rs 2,028 crore, were exported.

Export demand of basmati rice has already come down by 4.5 lakh MT (31 per cent) in view of the various past policies and market changes in the last six months.

"Lowering MEP does not make sense as Pakistan MEP ($1,300) would help Pakistani farmers to gain the Gulf market," said Anil Mittal, chairman and managing director of KRBL, which sells basmati under the `India Gate' brand.

Government and exporters have spent millions of dollars to build the basmati rice export market.

It is also feared that large-scale international litigation between exporters and buyers would occur as there is a fixed price-fixed quantity contract, Mittal said, adding the export duty will further bring down export demand by 20 per cent on an immediate basis.

The net loss of export demand will be 38 per cent in FY09.

On the domestic front too, the impact of export duty on basmati rice will be severe.

"Nearly 800,000 farmers are expected to be directly affected in the northern region, western UP, Punjab and Haryana due to the export duty on basmati," All India Rice Exporters Association's president Vijay Setia said. "This tax translates to Rs 14 a kg tax on paddy which translates to 34 per cent tax on farmers. This is the highest tax ever been imposed on agricultural commodity by the government."