After banning wheat exports in mid-May, the Narendra Modi government has now imposed restrictions on rice shipment as well. There are, however, differences. The decision on wheat was ex post, following the belated recognition of a poor harvest. The ban on exports — just days after official claims of India “feeding the world” — came as sudden as the realisation of the damage that the spike in March temperatures had done to the standing crop. The curbs on rice exports are ex ante — in anticipation of output shortfall due to deficit monsoon rains in Uttar Pradesh, Bihar, Jharkhand and Gangetic West Bengal plus possible yield losses in Punjab and Haryana from a new virus causing “dwarfing” of plants. Secondly, there is no blanket ban on rice shipments yet, unlike with wheat. Exports of basmati and parboiled rice will continue to be allowed freely. That makes sense, since these are relatively premium and value-added rice going to markets — West Asia, Africa and Bangladesh — which need to be nurtured, including from a strategic perspective.
The restrictions imposed now relate only to non-parboiled non-basmati rice, on which a 20 per cent export duty has been slapped. That, too, isn’t a bad move. If the government feels that domestic production is going to fall and might put pressure on public stocks — it could well be the case — a tariff on exports, rather than outright ban, is the right response. A 20 per cent duty may not also hurt exports much, given that India is the largest as well as cheapest rice supplier in the world market. Where the government has really erred is in prohibiting exports of broken rice. These, it is said, are going mainly to China, Vietnam and Indonesia for making animal feed. But why should that be a problem? When there is an export market for broken rice — which usually sells at a huge discount domestically — why deny the Indian farmer and trader the opportunity for better realisations? Again, the answer to any domestic shortage or price surge is tariffs, not ban, on exports.
Agriculture policymaking in India has suffered from two major deficiencies, among others, in recent times. The first is extreme short-termism — the imposition of export bans and stocking controls at the slightest hint of shortages. The second is poor market intelligence and lack of credible production estimates. The best example is wheat, where the agriculture ministry has pegged the 2021-22 crop size to have been just 2.5 per cent lower than the previous year’s. What, then, explains the government’s own procurement falling to a 15-year-low or its decision to ban exports? Policy credibility and transparency are key to any functioning market economy.
