Removal of minimum export price of Basmati rice by Centre is welcome

Indian Farmers can have good earnings from rising global prices

By Tirthankar Mitra

People on both sides of the Indo-Pakistan border have a lot in common, including sporting events in which players of the two countries put their playing skills against each other together by tucking into a plate of fragrant basmati rice. Giving a leg up to Basmati rice produced in India, its Minimum Export Price (MEP) has recently been removed.

Also known as Oryza Sativa, Basmati is a long slender grain of aromatic rice. It gets its name from its appetising smell. India accounts for 65 per cent of international trade in basmati rice. The rest is exported from Pakistan and Sri Lanka.

The sales have soared by 10 to 12 per cent after the MEP removal. Basmati's first mention can be traced to Heer Ranjha by Punjabi poet Wasir Shah in 1766 indicating that it has been cultivated in India for centuries.

Pakistan has been the only other producer of basmati rice. The price floor restricted India's ability to compete effectively on price, especially in key markets like Iran, Saudi Arabia, U.S and Europe. The removal of MEP addressed this issue directly allowing India to export basmati at more competitive rates. This is expected to drive higher export volumes. The decision of removing MEP comes at a time as farmers prepare to harvest the new crop. The tillers of the soil can expect smoother sales and better prices for their produce.

The farmers can look up to better times as the rollback of MEP will compensate for increases in input cost like fuel and fertilisers. Both the components are essential prerequisites of farming eat into their profits. Apart from boosting India's share into global premium rice market, the withdrawal of the MEP will shield the farmers from rising production costs and debt.

It will be a game changer for both exporters and farmers. The previous floor price of Indian basmati rice started at $1200 per ton and later was reduced to $ 950 per tonne. This was disadvantageous to the exporters in a competitive global market.

Decision to do away with MEP is part of a larger strategy to regain India's share in the international basmati market. Thanks to the unique quality of rice of basmati varieties India holds a dominant position in the premium rice market.

But price constraints blocked India's way to capitalise on the global demand. With MEP no longer burdening the price, a larger number of buyers can be catered to as it hits the stores at a more affordable rate.

It will clear existing stocks and ensure a greater flow of income to a large section of farmers especially those who are financially vulnerable. The political significance of the elimination of MEP has to be taken into account.

The government has earned ire of some of the farmers community in the light of recent export restrictions on onions. The farmers had felt international trade was being prioritised at the cost of their livelihood.

Farmers form a significant part of the voting bloc. And there lies the rationale of rolling back MEP which goes beyond economic significance. The decision eases increasing pressure on the government from rural constituencies. It is a win-win situation even at a second glance. (IPA Service)