Farm export limits could be fixed even during low supplies
NEW DELHI: India’s proposed move towards a liberal agricultural exports regime will require the government to fix permanent threshold quantities of farm commodities that will be free from any kind of trade restrictions, a senior government official said.
If implemented, this will be a critical shift away from past policies because the country will have to keep a certain level of farm exports going even when the supplies are low, for example during drought.
Interministerial consultations are currently on to finalise a new commerce ministry-anchored policy on farm trade, in step with the government’s target of doubling farmers’ income by 2022.
It seeks to boost agricultural exports from $30 billion currently to nearly $60 billion by 2022 and remove restrictions on trade of farm commodities, other than those “critical to the country’s food security”. India has frequently clamped down on farm exports to shore up domestic supplies and to keep prices in check. The new policy seeks to reverse this approach.
“We will now need to scientifically determine threshold limits of quantities of key commodities which will have to remain free for exports,” agriculture secretary SK Pattanayak said.
To finalise the policy, authorities will need extensive data crunching, fairly reliable output estimates and harmonizing of domestic production with global demand, officials said after a review by the Prime Minister’s Office last week.
These are tough challenges, independent experts say. The sector is blighted by market imperfections, such as lack of transparency and information about prices, supply and demand. Middlemen often rig the system to their advantage.
The government’s Doubling Farmers’ Income (Volume IV) report last year stated that India’s exports policy “does not promote agricultural trade but is mainly used to control prices in the domestic market”. For instance, a three-year ban on non-basmati rice exports during 2008-11 amid a rice glut led to a “notional loss of $5.6 billion”.
Such moves disrupt trade and create unpredictability for importing nations. India’s farmers now have consistently jacked up production of commodities such as sugar, onions, soya, wheat and rice, causing prices to crash. Pulses output has shot up to about 17-18 million tonnes from 13-15 million tonne levels just five years ago. The country, therefore, now needs new exports markets.
It will still be difficult to suddenly globalise India’s agriculture, analysts say. “Either you have an open trade policy or you do not. These kinds of highly calibrated policies do not work,” said Pravesh Sharma, a senior visiting fellow at the Indian Council for Research on International Economic Relations, a think tank.
Sharma said for a trade policy to work, it is also important to also have an open import policy. “For instance, our non-farm imports tariffs are around ASEAN levels, between 18-20%, but agricultural tariffs are still very high,” he said. ASEAN is short for the Association of South-East Asian Nations.
Pattanayak, the agriculture secretary, said as part of the new policy, farmers would have to be made aware of international demand and prices. “We aim to do this through farmer producer organizations,” he said.
THE NEW POLICY SEEKS TO BOOST AGRI EXPORTS FROM THE CURRENT $30 BILLION TO NEARLY $60 BILLION BY 2022