Centre defers decision on rice export ban & edible oil duty .

NEW DELHI: Apparently worried about possible adverse impact on its electoral fortunes, the central government has deferred a decision on lifting the  ban on rice exports, raising duty on edible oils and a crop insurance scheme for plantations.

The empowered group of ministers (EGoM) met on Tuesday to consider the question of lifting the ban on export of rice and raising duty on edible oils. The group deferred taking the decision indefinitely. A key reason for not deciding on rice exports is the impact the decision is likley to have on domestic prices.

Though rice prices in the global market have held steady, they declined in October. Even at a lower price, Indian rice exporters stand to gain from the lifting of the ban. This would mean that as much as a million and half tonne of rice (basmati and other high quality non-basmati) would make their way to the global markets. This is bound to impact prices of rice domestically.

The Congress is already dealing with the impact of double digit inflation and sustained high prices of essential commodities, in its quest to dislodge the BJP in Chhattisgarh, Madhya Pradesh and Rajasthan. Further, Prime Minister Manmohan Singh has already warned that even if inflation is contained, a regime of high prices will continue on account of high input costs.

The Congress-led central government is therefore unwilling to add to the burden and provide the BJP with yet another stick to beat it with. It is a similar line of thinking that may have led to postponing the decision on raising customs duty on edible oil.

With the global prices of edible oil declining appreciably, there is a fear of the domestic market being flooded by cheaper imports. However, even if the government were able to arrive at an understanding that there would be no appreciable rise in the prices of edible oil once duties were raised, it is a chance that the Congress is unwilling to take.

Any rise in prices is bound to provide more grist to the BJP mill. The BJP, which in power in these states is focussing on the mismanagement of the economy by the Congress-led alliance at the Centre and the price it has inflicted on the common man.

The GoM considering the Rs 729-crore crop insurance scheme for the plantation industry met on Wednesday; it deferred taking a decision till December after consulting the states. On the table is the insurance scheme benefiting tea, rubber, tobacco and spices plantations for a period of five years.

Differences over who would bear the financial burden of the scheme is understood to be the reason for deferring a decision. There is a view within the GoM that states should shoulder some portion of the fiscal burden, while the commerce ministry is of the view that since plantation crops covered by the scheme are administered under central legislation, the Centre should completely fund the insurance scheme.

The GoM decided that a final call would be taken in consultation with the states. These would include Karnataka, Tamil Nadu, Kerala, Assam and West Bengal. While none of these states are election bound, the prospect of the centre passing on financial burden to the states could further dampen sentiments against the Congress—a possibility it would like to avoid.

Source : The Economic Times