The Centre should spare a thought for sugarcane and soyabean growers before contemplating export bans, as they stand to lose the most from such action.

The Centre should ignore the growing clamour, including that emanating from its own quarters, for restricting exports of various farm products in view of this year’s deficient monsoon. From all accounts, the commodities currently under the scanner include wheat, sugar, maize, oilmeal and, of course, the perennial target, cotton. In the case of maize and oilmeal, the pressure for imposing curbs is coming primarily from animal feed manufacturers and the dairy industry. Likewise, there are roller flour mills who want the Centre to stop all wheat exports on private account, or the Textiles Ministry batting for yarn-makers by proposing a tax on cotton shipments.

The Centre has, of late, been routinely subjected to such pressures on trade policy. Even if those lobbying for these do not get their way, the resultant uncertainties on the trade front provide enough opportunities for speculative profits in commodity markets. That said, while considering these demands, the Centre should first spare a thought for those who truly stand to lose from export clampdowns. At this point of time – when kharif sowing is virtually complete and the crops are due for harvest in the next three months – the real losers from any curbs on sugar or soyameal exports would be sugarcane and soybean growers. Sugar mills and oilmeal exporters actually gain when market sentiment is weak during peak crushing or crop arrival time, as there is less possibility of cane or bean prices being bid up. If the export restrictions can be revoked after the main procurement season, it would be a double win for processors, even as farmers are shortchanged – first by nature and then by ‘policy’. This consideration alone should prevent the Centre from bringing back controls on agri-exports, having mercifully rolled these back over the last 7-8 months. If hardening domestic prices of wheat or rice are a concern, what stops the Centre from offloading grains from its 76 million tonnes stocks, which are 2.5 times the required buffer and strategic reserve norms? Why go after private exporters at all, if surplus wheat from its godowns can be made available to flour mills at a reasonable market price, thereby also helping reduce the spiralling food subsidy bill?

Export controls, in any case, cannot be based on pressures from vested interest groups or knee-jerk reactions to short-term price movements. Take, for instance, sugar, where retail prices have shot up by around Rs 5/kg in the last one month. While mills are certainly making money at these rates, that surely cannot be cause for the Centre to shut the window on exports. It would, moreover, overlook the losses that sugar companies suffered in the previous quarters, leading to mills in Uttar Pradesh alone piling up cane dues of Rs 3,000 crore as of June. If improved realisations have since helped reduce these arrears – which would encourage growers to plant more cane – isn’t it better to allow prices to correct in the natural course? Such adjustments can happen faster and more efficiently in agriculture than in, say, real estate. Provided, the markets are allowed to function normally.

(This article was published on August 9, 2012)
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