The Hindu Business Line : DGFT effects partial relaxation of ban on non-basmati rice exports

New Delhi, Nov. 19 The Director General of Foreign Trade (DGFT) notified late Tuesday night a partial relaxation of ban on the export of non-basmati rice in favour of two 100 per cent export-oriented units (EOUs) each in Pondciherry and Andhra Pradesh, even as the ban on such exports has been in vogue since April 1, 2008 to prevent low-priced rice from getting exported to endanger food security.

The notification letting the two 100 per cent EOUs viz., Venkatachalapathi Modern Rice Mill in Pondicherry and Bharat Exporters, Hyderabad is for export of 12,500 tonnes each at a minimum export price of $1,000 a tonne. The export should be during the kharif marketing season 2008-09.The notification follows the decision by the Empowered Group of Ministers under the Chairmanship of Mr Pranab Mukherjee which met here on November 4 and decided to let the two 100 per cent EOUs to export and directed the Department of Commerce to put in place appropriate systems for monitoring and to ensure that the upper quantitative ceiling of 25,000 tonnes is strictly adhered too, sources in the Government told Business Line here.

WRONG SIGNAL

Policy analysts contend that since the DGFT notification has not spelt out whether the permitted non-basmati rice export is premium or common variety but which fetches a MEP of $1000 a tonne, the possibility of common grade non-basmati rice could also be exported masquerading as rice fetching an MEP of $1000 a tonne. In that case, the original justification for clamping a ban on export of non-basmati rice in view of their low-priced leverage to ensure domestic availability gets defeated outright. Moreover, by apportioning the quantum of exports of 25,000 tonnes to two EOUs, the government gives a wrong signal to other exporters who would be suspect in the eyes of overseas buyers as if they are not in the race or reckoning. The export of 25,000 tonnes of non-basmati rice from the two States would also dent the States’ drive to procure for the public distribution system, if the units export common rice varieties, they caution They also point out that when the sale and movement of rice is banned from Andhra Pradesh to other States, how could this EOU located in that State be allowed to undertake export?

Industry sources also state that recently the Supreme Court held in the ban on export of non-basmati rice case that the export of 100 containers of rice to Dubai by Bharat Exporters is inconsistent with the extant policy provisions and national interest. Hence, the apex court ordered the said exporter to bring back the containers to India which was exported to Dubai when the ban has been in force. They say that an EOU gets a host of fiscal benefits solely because it has to undertake mandatory export commitment or earn net foreign exchange. However, when a ban is promulgated by the Government, the obligation of an EOU becomes nugatory since the EOU can not export the banned item. This is a risk the EOU is conscious about and cannot ask the government to bail it out. They further said the EOU units which were given policy relaxation do not have production capacity to produce 12,500 tonnes each and not enjoy past export performance to justify the grant of 25,000 tonnes.

They argue that in accordance with the Clause 6.12 of the FTP under sale of unutilised material, it is clear that rice mills in EOU can sell in domestic tariff area after duly disbursing the import duty. Since the rice import duty is now nil, the net commercial effect to EOU rice mills are negligible or there is no loss it sustains while selling in DTA.

When contacted, the South Indian Rice Exporters Association Secretary, Mr P.Visnhu Kumar, said the policy of permitting only EOUs to export is inconsistent with the provisions of the Foreign Trade Policy and is discriminatory, besides being dangerous to the rest of the rice exporters as their image would be seriously eroded. He said premium non-basmati rice such as ponni, sona masuri and ratta exports from the South normally are around 1.5 lakh tonnes and they cater to expatriates abroad and their export does not pose any threat to food security, unlike common or coarse grade non-basmati rice.

While the officials in the Commerce Department said only two rice manufacturers are in the 100 per cent EOU scheme, the industry sources said that any such concern for the two units should not be at the expense of larger exporting community of rice particularly by relaxing the policy regime in minority favour when sufficient fiscal sops are extended to them to stay exporting. They seek an immediate review of the ban on premium non-basmati rice to safeguard their market share and ensure remunerative price to rice growers of this variety.

Related Stories:
eGoM to decide on lifting ban on premium non-basmati rice exports
Is ban on non-basmati rice exports being flouted?
‘No plans to relax ban on non-basmati rice exports’

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