Farm export policy: High target may remain beyond reach without reforms, incentives

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Published: December 10, 2018 5:50:21 AM

It’s better to have at least a policy that promises a predictable export regime with no curbs on processed and organic farm products, than not to have at all.

Export curbs include the imposition of minimum export price, quantitative limit on shipment, export duty and an outright ban.

The government’s target to raise farm exports to $60 billion by 2022, as envisaged under a new policy, from $38 billion in FY18, is a Herculean, if not impossible, task, given that key commodities —ranging from grains to cotton that make up for a bulk of outbound shipments — still face risks of export curbs, analysts reckon. Also, its pledge to ensure farmers get a 50% profit over their A2+FL costs, if backed by commensurate procurement, could cause domestic prices to soar and erode export competitiveness, especially as global prices remain subdued.

What is, however, even more daunting is the task to double farmers’ income by 2022.

Higher farm exports, the new policy says, will be one of the drivers of farm income.

Although details approved by the Cabinet are awaited, the analysts say elevated exports and farmers’ income won’t advance in sync, unless massive structural reforms are undertaken to improve marketing infrastructure and remove middle men from the trade. Although the policy highlights the need to abolish the archaic Agriculture Produce Market Committee (APMC) Act, it’s easier said than done, given the failure of successive governments to do so despite repeated promises. In fact, Maharashtra, which removed farm produce from the APMC purview via an ordinance, did a U-turn late last month, giving in to the pressure tactics of traders and commission agents. Also, even if farm items are removed from APMC registries, unless new mandis are set up in the private sector, the APMC mandis will continue to have their monopolistic grip over agricultural trade.

Nevertheless, it’s better to have at least a policy that promises a predictable export regime with no curbs on processed and organic farm products, than not to have at all, the analysts add.

Ashok Gulati, former chairman of the Commission for Agricultural Costs and Prices and current professor for agriculture at ICRIER, said: “It (achieving the target) is possible if they build export value chains, keep them free from any export restrictions, encourage investment in infrastructure for export value chains, ensure food safety standards. The potential is much more.” Gulati, however, added that farm exports had exceeded $42 billion in 2013-14. “So in nine years, if the NDA wants to achieve $60 billion, that’s not anything great to boast about.”

Some others are less sanguine. Biswajit Dhar, professor at Centre for Economic Studies and Planning of JNU, said merely because a target is set doesn’t mean farm exports will automatically rise. The government has to ensure that structural reforms are undertaken in farm marketing and our products match international standards. Farmers, who are forced to make distress sales—often because the middle men corner the profits–must get fair returns to keep producing, he said.

Pronab Sen, former chairman of the National Statistical Commission, added: “Any dismantling of the archaic APMC Act (as envisaged in the farm export policy) must be preceded by an alternate, robust marketing structure that will enable farmers to sell their produce easily and at fair prices. Otherwise, they will be left in the lurch (in the absence of even an APMC structure to sell his produce).”
Analysts feel unless these fundamental challenges of agriculture are addressed and exports are incentivised properly, a steady rise in farm exports will remain a dream.

Supported by elevated global commodity prices, farm exports hit a record $42.8 billion in 2013-14, before witnessing a drop. Last fiscal, the agri exports reversed a three-year slide to post an over 14% rise to $38.2 billion. However, the growth again slowed down to just over 2% to $18.6 billion in H1FY19, trailing a double-digit rise in overall merchandise exports.

Export curbs include the imposition of minimum export price, quantitative limit on shipment, export duty and an outright ban.

The fact that frequent curbs have dented export prospects is acknowledged by the commerce ministry. The three-year (2008-2011) ban on non-basmati export to tame inflation led to a notional loss of $5.6 billion, the ministry estimates. Adding procurement incidentals and storage losses in over-flowing central stocks and loss to farmers due the ensuing glut and lower farm price realization, experts suggest the figure may be around $7-7.5 billion, it says.

The government had imposed a ban on exports of wheat in 2007 as well and kept it for four years. It has resorted to curbs on onion exports almost every year and periodically slapped restriction on cotton and sugar exports as well. A ban on exports of key pulses and oilseeds was in effect for a long time. In recent years, though, the fluctuations in the farm trade policy have reduced considerably.

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