EGoM allows additional exports of sugar, non-basmati rice; cuts MEP of basmati

In a decision that is likely to benefit the rice farmers and sugar millers, an Empowered Group of Ministers (EGoM) chaired by Finance Minister Pranab Mukherjee has decided to allow the export of more sugar and non-basmati rice, and lowered the floor price of basmati rice exports to boost farm trade. These decisions were taken recently by the EGoM, which met to take cognizance of the issues put forth by the farm sector.

The EGoM has decided to increase the limit on sugar exports by 1 million tones. Sugar manufacturers have been demanding that they be allowed to export additional quantities of sugar given the expected increase in production this year. According to the Indian Sugar Mills Association (ISMA), sugar production is likely to be 26 million tonnes in 2011-12, while the annual domestic consumption is 22 million tonnes. Given the excess production, it was demanded that permission to export greater amounts of sugar be granted.

India is the largest consumer and the second largest producer of sugar in the world had exported 2.6 million tonnes in 2010-11 marketing year. The ISMA is of the belief that one million tonne of sugar export will help the sugar mills realize an additional Rs 3,000 crore, which would help them to pay farmers at a time when crushing is in full swing. In a bumper cane season, sugar millers are already reeling under the impact of high cane prices as liquidity pressures build-up prompting them to default on payments to farmers.

The EGoM has further decided to decrease the minimum export price (MEP) of basmati rice by 22%, from $900 a tonne to $700 a tonne. Rice exporters have been demanding a lower MEP to compete against chief rival Pakistan, which does not impose any floor price. The prices of basmati, over the past one year, had crashed from an average of $1100 a tonne to around $650 a tonne, triggering a demand from exporters to abolish the MEP. The MEP was introduced a couple of years ago to ensure that non-basmati is not exported as basmati. With the lowering of MEP they shall be able to export 2.5 million tonnes of basmati.

In another significant decision, it was decided to raise the limit on non-basmati rice exports from 2.2 million tonnes to 4 million tonnes. The EGoM also allowed non-basmati rice export to Bangladesh through land route. At present, India exports rice to Bangladesh only through selected ports. The decision is likely to make export to Bangladesh for the eastern states like Bihar and West Bengal much easier through several export points on the borders. The EGoM decision comes at a time when West Bengal government is finding it difficult to procure rice and the farmers are reeling under distress sale of rice. The distress sale of rice in Bengal has also led to a major political row in the state.

However, the panel did not approve further reduction of onion MEP. Instead, it has decided to set up an Inter-Ministerial Group (IMG) to review the situation. The MEP for onion is currently at $150 a tonne for common varieties.