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New Delhi, May 18: The government’s latest alteration to rice trade policy — imposing export duty on basmati rice and lowering the minimum export price — has come in for sharp criticism from international trade experts as well as industry chambers. The Centre has imposed an export duty of $200 per tonne on basmati rice and lowered the minimum export price to $1000 per tonne.
In a letter to Prime Minister Manmohan Singh, the Federation of Indian Chambers of Commerce and Industry (Ficci) has said that the decision would not have any impact on inflation as consumption of basmati rice is a paltry 0.2% of the domestic rice consumption. The country consumes close to 89 million tones of rice and the meager domestic consumption of basmati is attributed to upper income consumers. On the other hand, it will mean rice farmers will lose out on lucrative market share in the global rice trade. “Besides directly impacting the farm income, the measure would rattle the confidence of importers in India’s export policy and might result in reduction in country’s share in global trade,” Amit Mitra, Ficci’s director general has noted in his missive to the PM.
Director, Indian Institute of Foreign Trade (IIFT) KT Chacko agrees that the measure would definitely impact India’s credibility in international trade. “Though India’s share in global agricultural trade is negligible, export restrictions would adversely impact its image as an agricultural product exporting country,” Chacko told FE. In 2006-07, 1.06 million tonne of basmati was exported for Rs 3,064 crore and basmati paddy farmers realized Rs 2,298 crore. Basmati rice exports have grown 12% from 1991-92 till 2006-2007. India controls close to 53% of the total basmati rice market.
The export restrictions would partly undo the government’s major contributions in pushing for exports and undermine market access of basmati rice exports. The chamber fears that unlike other items, export duty on basmati will have direct implications on farm income.
“Among the top priorities of the government is to raise farm incomes. The imposition of export tax it would, on the contrary, send negative signals that government is more interested in revenue collection rather than increasing the income of farmers,” Ficci’s letter to the PM concludes.
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