Cotton exports in half measures

Does the Government deserve to be complimented for lifting the curb on cotton exports? Not really, for the imposition of quantitative restrictions last October was unwarranted in the first place. The country lost an extraordinary opportunity to ship out large quantities and benefit from premium prices in the overseas markets. The attempt to free exports now is but half-hearted. The open general licence is valid for a limited period — August and September — when shipments usually slow down because of seasonal factors (the monsoon) and logistics challenges. In other words, cotton exporters still do not know what the export policy will be for the new season beginning October 2011 and cannot make any fresh commitment. There is absolutely no reason why exports should not be open for the new season as well. The acreage planted with cotton is normal and, on current reckoning, there is expected to be a good harvest that would leave sufficient surplus to export after meeting domestic needs.

The best way to promote exports is to put in place a steady and transparent export policy with a long-term perspective. It simply means that, barring exceptional circumstances, there will be no change in the liberal export and import policies on commodities. Yet, certain exigencies may arise that demand restrictions. In the event, without tinkering with the exim policy, the government can deploy the tariff instrument to moderate foreign trade flows. Customs duties can be imposed to reduce trade flows, and eased to encourage such flows. It would be appropriate that, for the 2011-12 season, beginning October, the government right away announces free export of cotton, so that there is no policy suspense and exporters are in a position to strike trade deals, based on the demands of the global marketplace.

Indeed, there is something fundamentally wrong with the export policy for agricultural commodities formulated by the Commerce Ministry. Even before memories of the cotton quota allocation fiasco have receded, has the latest victim of bad policy — non-basmati rice export — become the subject of court litigation. As it happened with cotton, now non-basmati rice export quotas are being openly traded by successful applicants, many of whom may have no intention to actually ship out rice. Transparent enforcement of commodity exports under a limited ceiling is no rocket science. Alternatively, why not put non-basmati rice export under open general licence, with the condition that stiff export duty will be imposed upon the aggregate shipment reaching a specified volume. One would expect the Centre and the Commerce Ministry to demonstrate a lot more practical wisdom, gained through years of experience in regulating commodity exports.

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