While this decision is, no doubt, debatable and hardly appears to be in the interests of the Indian oilseeds economy (an issue which deserves a critical analysis), it is rather strange that the castorseed processing industry has, time and again, been demanding either an outright ban on exports of castorseed, which seems difficult under the World Trade Organisation (WTO) rules, or a levy of heavy duty to stop such exports indirectly.

This argument against duty-free exports of castorseed treads on familiar grounds. It is adroitly pointed out that the nation benefits more from exporting the value-added castorseed products like castoroil and its derivatives than from exporting castorseeds.

Fears are also expressed that castorseed exports reduce the domestic castorseedavailability and as a result, raise its prices, squeeze the processing margin and in the process affect adversely both the castoroil output and exports. A similar scare is often created by teh cotton textile industry in regard to exports of raw cotton, which are,hence still subjected to absurd quota and canalisation restrictions.

Unfounded fears

In reality, the apprehensions about the liberalised exports of agricultural commodities appear to be altogether unfounded. To be fair, a import policy (though the converse need not necessarily be true, for, even WTO actually permits certain import safeguards to protect the domestic farm and processing sectors).

The two way liberalisation of agricultural trade envisages the globalisation of Indian agriculture and agro-processing economies, and above all ensures that the Indian farmers receive internationally competitive prices for the commodities they grow.

The virtual stoppage of castorseed exports, either directly through a downright ban or indirectlyby imposting a prohibitive export duty, would necessarily depress the domestic castorseed prices below the comparable international levels. This would hardly be the way to augment exports of the so called `value-added'castoroil and its derivatives.

Such suposedly value addition, if any, would simply be at the cost of castorseed growers.

On the other hand, under th free two-way international trade regime, so long as the domestic castorseed prices are at par withthe international levels, or tend to even exceed the latter, not only will the castorseed exports come to a halt, but imports may also be immediately be initiated to bring down the local seed markets.

This way the castorseed processing industry will be ensured the availability of castorseed at the prevailing world prices without sacrificing the interests of castorseed farmers.

In fact, the much trumpted `value additioni' in castoroil and its derivatives must flow from the processing and marketing efficiency of the castorseed processing industry,and not by denying the castorseed farmers a fair and remunerative price for their produce.

Liberalised castorseed exports ensure that farmers receive at least the most competitive prices as existing in the world markets. It is not just naive, but indeed pathetic to expect poor castorseed farmers to subsidise the prospering castoroil export trade and industry. To term such cross-subsidisation as `value-additions' is simply a travesty of this economic concept.

Short-sighted view

It is actually a short sighted view to propose prohibition of castorseed exports. On a more pragmatic plane, it is really in the interest of the procesors of castorseed and manufacturers of castoroil derivatives that castorseed exports be allowed freely alonwith those of castoroil and its products. The supply of castorseed being largely price elastic (with positive response of acerage to prices) it is imperative to maintain the relative prices of castorseed at levls favourable in comparision to those ofits competing crops,given the relative yield patterns.

In such a situation any attempt at placing needless fetters in castorseed exports to depress castorseed prices will in the long run bring about ashift in the cropping pattern away from castorseed, resulting in reduction in castor acerage and lowering of castorseed output. It would than not be long before India loses its prevailing predominant position in the world castorseed production and castoroil exports.

Also, it is difficult to understand the logic of castoroil manufacturers and exporters in seeking a ban on castorseed exports., when they are virtually in a monopolistic positino in the world of castoroil. If they are unable to exploit their monopolistic position, the fault is obviously not that of the castorseed farmers.

The oil manufacturers and exporters must blame themselves for this situation. True, in its end-uses castor oil is not without its substitutes synthetic or otherwise. The demand for castoroil is therefore, far from price inelastic. Evidently, itspre-eminent dominance notwithstanding, monopolistic pricing in castoroil has its limits.

Yet, the promotion of castoroil exports calls for improvements in processing and marketing efficiency rather athan subduing casotrseed prices to low levels to the detriment of castorseed growers. At the same ti9me, to maximise gains from value addition in its true sense, castoroil processsors must seek more outlets for castoroil derivatives, instead for castoroil per se.

Clearly, the solutions for promotion of value added exports in castorseed products lies in research and development, as also in structural transformation of the castorseed processing industry (in which, disappointingly the uneconomic small scale units with even ageold baby expellers still abound) and not in stopping needlessly castorseed exports.

(The author is an independent consulting economist and has been served as advisor on various agro-sector related panels of the World Bank)