New Delhi: The government’s decision to allow unrestricted exports of key farm items will improve earnings of farmers and industry, but stability in export policies holds the key to the sustenance of any profitability, experts said on Thursday.
A meeting, chaired by Prime Minister Manmohan Singh, decided to free sugar exports from curbs late Wednesday and scrap the benchmark price of onion shipments to increase earnings of farmers. It also decided to form a panel, to be headed by Prime Minister’s Economic Advisory Council chairman C Rangarajan, to suggest ways to handle surplus grain. Earlier this week, the government had decided to allow fresh exports of cotton after restricting the trade since March 5.
Stocks of sugar companies got a leg-up on Thursday responding to the late-night decision and outperfomred a 0.87% dip in the benchmark Sensex. Shares of the country’s largest sugar producer Bajaj Hindusthan gained 1.33% each at R30.40, while Balrampur Chini Mills rose 1.21% to R54.20. Similarly, largest sugar refiner Shree Renuka Sugars surged 4.38% to R32.20 and Simbhaoli Sugars inched up 3.33% to R31.
Separately, a panel set up by the Prime Minister under the chairmanship of Rangarajan to examine lifting decades-old government control over the sugar sector, met on Thursday and took stocks of various restrictions on the sector.
“What we need is a clear-cut and long-term policy on exports of farm items. Knee-jerk reactions don’t solve a problem, rather they aggravate it and pose serious risks to our reputation in the global trade. What we need most is a political will to do it,” said a senior government official, who didn’t want to be named.
The country allowed non-basmati and wheat exports in 2011 after banning them for around four years to keep domestic prices under control. It has regulated exports of cotton as well as sugar in the past two years. The policies--aimed at protecting consumers, especially of food items — have squeezed farmers’ earnings, and those exporting value-added products, too, have suffered badly..
“The decision to free sugar exports will help us pay cane arrears of around R10,000 crore to farmers. But for mills to reap any worthwhile benefits, the policy of free exports has to be extended beyond the end of this marketing year through September,” said Indian Sugar Mills Association director general Abinash Verma. He said mills can’t ship more than 400,000 tonne a month due to logistics issues, and the gap between global and Indian sugar prices has also narrowed significantly.
Traders managed to ship out barely one-fourth of the wheat products export quota of 650,000 tonne in the fiscal year that ended March 31, as buyers shied away due to the lack of a long-term policy, said Veena Sharma, secretary of the Roller Flour Mills Federation of India.
“The difficulty is nobody firms up contracts relying on guess work that the government may relax rules in your favour. Your buyer wants firm commitment on supplies and delivery in time apart from competitive prices. The unpredictability in policy decisions is wrecking trade,” said a flour miller.
Last month, complaining against export policies that are hurting farmers, agriculture minister Sharad Pawar had written to Singh: “You are aware that pesticide costs have escalated by nearly 150%, seed costs by 75%, fertiliser costs—especially urea—by 60% and diesel costs by nearly 75% over the last couple of years. Added to this is the extremely high cost of labour on account of MNREGA. For the MSP to cover all these costs is well high impossible and it’s thus necessary to allow a free market and trade regime to ensure remunerative prices to the farmers.”
Commenting on the scrapping of the minimum export price of onion, National Agricultural Cooperative Marketing Federation of India board member CB Holkar said, “The government should also abolish canalising agencies for onion exports so that service charges levied by them will be removed. Such a move will help farmers.”
Analysts said while the agriculture ministry will pitch for a farmer-friendly policy, the food ministry will favour decisions that cater for consumers’ interest. “And such a perception makes it all the more important to have a long-term view balancing the interest of producers with consumers,” said an analyst.