Minimum Export Price

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.

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.

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

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.

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

Include other premium varieties: Other premium rice varieties not sold through PDS will also be insulated from trade policy vagaries like MEP.