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  • Context (PIB | IE | IE): GoI is increasing the minimum export price (MEP) on agri products like wheat, rice, and onion to ensure domestic availability.

Minimum Export Price (MEP)

  • MEP is a trade policy tool governments use to set a floor price for certain exportable commodities.
  • Objectives of implementing MEP may include:
    • Food Security: To maintain affordable access to essential food items.
    • Price Stability: To prevent export-driven domestic price spikes.
    • Revenue Generation: To generate income from exports.
    • Market Control: To maintain control over the export of strategic or sensitive products.

Recent MEPs Imposed by GoI on Agri Products

Agri Product

Minimum Export Price (MEP)

Basmati Rice $1,200/tonne
Onion $800/tonne

Reasons Why MEPs Imposed by GoI on Agri Products

  • To ensure domestic availability and curb food inflation.
  • Competitive populism: A political strategy in which different political parties or leaders compete to offer populist policies to gain the electorate’s support.

Implication of MEPs Imposed by GoI on Agri Products

  • Losing export markets: E.g., India may lose its basmati export market to Pakistan.
  • Reduced export competitiveness: It will lead to a reduction in export volumes.
  • Trade disputes: Other countries may see MEPs as trade barriers.
  • Market distortions: Lower exports discourage farmers from producing certain crops, affecting the country’s crop selection and cropping patterns.
  • Implicit tax on farmers: It may hurt farmers who rely on exports for their income.
  • Complexity and administrative burden: It may require additional resources to monitor and enforce.
  • It leads to smuggling and other illegal activities
  • Negatively impacts the food security of some countries

Minimum Export Price (MEP) for Rice

  • GoI is restricting rice export to ensure adequate availability of rice in the domestic market.
  • Recent restrictions by GoI on rice exports:
    • MEP of $1,200/tonne on basmati rice
    • Ban on the export of non-basmati white rice
    • Ban on the export of broken rice: To ensure adequate availability for domestic livestock industry consumption and ethanol production.
    • Export duty of 20% on rice in the husk (paddy or rough), husked (brown rice), and semi-milled or wholly-milled rice
    • Export duty of 20% on parboiled rice.
  • Limitation: Selective export controls, such as those on rice, can be bypassed through misclassification. For example, white non-basmati rice is exported under heads of parboiled and basmati rice.
  • Parboiling is a process where fresh paddy is soaked, partially cooked, and then milled.
  • It yields firmer rice grains with fewer breakages and preserved micro-nutrients from the bran.

Issues with MEP for rice

  • MEP was set only for basmati and excluded other premium-quality Indian rice.
  • The MEP set for basmati was too high ($1,200/tonne).

Other Premium Quality Indian Rice Varieties

  • Gobindobhog in West Bengal
  • Kalanamak in eastern Uttar Pradesh’s Terai region
  • Chak-hao in Manipur
  • Red Matta in Kerala
  • Ponni in Tamil Nadu
Solution: Uniform MEP
  • Include other premium varieties: Other premium rice varieties not sold through PDS will also be insulated from trade policy vagaries like MEP.

    India’s agri-exports

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