Export control raj

B

ans and prohibitions, almost by definition, are imposed only selectively on items whose production or consumption is deemed dangerous or immoral. In the case of others, they are to be invoked only under the most exceptional circumstances. But when it comes to export of farm goods, these rules seldom hold: Curbs here seem to represent the normal state of affairs. The last week or so has seen a flurry of activity, though, with the Government announcing a lifting of restrictions on exports of cotton, sugar, onion and milk products. These moves have, however, been triggered more by political than economic considerations. The Government is seen to have ‘succumbed' to pressure from the Union Agriculture Minister, Sharad Pawar, whose State, Maharashtra, is a major grower and processor of these commodities. The fact that it required intense lobbying from a powerful Minister to restore what ought to have been normal economic freedom, only highlights how distorted the policy environment with regard to farm trade has become.

Even the latest decisions do not indicate any complete or unconditional freeing up of exports. Thus, in cotton, fresh export registrations have been allowed, but the situation would be ‘reviewed' every two weeks. In dairy products, shipments of casein have been permitted, but not milk powder. This, despite the latter consuming only a third of the milk required for producing an equivalent quantity of casein! In sugar, the Government had, in March, cleared exports of an additional one million tonnes (mt). Its implementation was, however, stalled by the Food Ministry, which did not issue the necessary notification and formal release orders. Now, suddenly, all quantitative restrictions, including mill-wise quotas and release order requirements, have been dispensed with. But the Food Ministry apparently has set an internal ceiling of two mt, beyond which the curbs may be re-imposed. A similar Damocles' sword hangs over onion, where the need to adhere to a ‘minimum' export price has been scrapped — for now.

All this raises a larger point about the very efficacy of export bans or other physical trading restrictions. These are often knee-jerk responses to levels of inflation in the economy; hence, even the most effete action is seen as politically preferable to non-action. There may be periods of occasional relaxation, benefiting largely those in the know about such easing, or influential enough to grab the quotas and speculative opportunities arising therein. The permanent damage they cause — by discouraging producers from augmenting supplies — is, however, immeasurable. The consumer suffers for such actions. And yet, the Government claims to be acting in his interest, by harming someone who is actually his best friend — the producer. Like large corporates, farmers and agro-processors too, require a predictable policy environment to operate in. It's high time we have a farm export policy, underpinned by firm legislation, that makes bans the exception rather than the rule.

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