Bitter not better sugar joins wheat in the list of restricted farm exports even in inflationary times an unwise move

Bitter not better sugar joins wheat in the list of restricted farm exports even in inflationary times an unwise move

Sugar this week joined wheat on GoI’s list of farm commodities facing an export clampdown. It’s been placed in the restricted category. There’s also a cap on the volume of sugar that can be exported in the current cycle. GoI’s overarching aim of checking food prices has everyone’s support. However, resorting to blunt instrument measures such as export bans is unwise – because of the collateral damage.

There are three consequences of export bans. One, it undermines the larger policy objective of allowing greater play for market forces in agriculture to give farmers more options. For example, the ban has led to disputes between firms exporting wheat and the agricultural chain. A trust deficit between farmers and other stakeholders will make it harder to reform agriculture. Two, export bans are an implicit tax on farmers as they amount to a cap on income. They make it harder to garner support from farmers for reform. Three, export bans when global food prices are rising undermine India’s credibility.

Reports indicate that India is reluctant to participate in the UN’s World Food Programme for grains if it means acceding to a binding pact. It’s unwise to quibble over conditions when there’s a food crisis facing many emerging countries. Is there an alternative to export bans? Yes, fiscal policy can be used to top up support prices and enhance GoI procurement. The third advance estimate showed that wheat output in 2021-22 will be 106.4 million tonnes, a mere 3% lower than last year. This estimated drop can be offset by fiscal policy that will help farmers, raise India’s global standing and aid the cause of agricultural reforms. As for attendant fiscal costs, it’s far less distortionary than disallowing producers to respond to price signals.