NEW DELHI: A top government panel slated to meet on Tuesday might revoke the export cess on basmati rice, according to a senior official who
asked not to be identified.
A meeting of the empowered group of ministers (EGoM) may cancel the Rs 8,000-per-tonne cess on basmati exports, levied since April 2008 over and above a minimum export price (MEP) of $1,200 per tonne, said the official.
Exporters have been complaining that the high export cess on Indian basmati was giving an undue advantage to Pakistani exporters. Key ministries including food, civil supplies, and commerce are in favour of removing the cess while the finance ministry was, until early this month, reluctant to okay the proposal, said the official.
India exports an average of 3 million tonnes of basmati every year.
By March this year, exporters claim they won’t be in a position to pay farmers for the new crop if current stocks do not sell. Even prices of non-basmati varieties, in the three months between September and November, dropped by over 50% and worldwide demand plummeted on the back of recession.
Traders have been contending that while a premium of $100-150 per tonne over Pakistan is sustainable, a premium of $400-500 is impossible to maintain.
“In the prevailing scenario, buyers are unwilling to pay the high price for Indian basmati. And an export tax on top of that is simply unacceptable,” an official of the All India Rice Exporters Association (AIREA) told ET earlier this month. “What’s worse is that basmati acreage has increased in anticipation of higher prices globally,” he said.
According to conservative official data, India’s basmati exports have dipped to 7.15 lakh tonnes this fiscal till December 21, compared to 7.51 lakh tonnes in the year-ago period.
In addition to plummeting global rice prices, good domestic stocks and output estimates of foodgrain may also have influenced those opposing the removal of export cess. The food ministry’s support to the proposal to remove the cess is important, especially given the apprehensions in the latter half of last year that domestic rice supplies would be tight, thus boosting prices high and taking a political toll on the ruling UPA government.
Since then, however, rice output and procurement have reached record levels, the output estimate for wheat in the 2008-09 season is also higher than last year and the government’s buffer stock for foodgrain are far exceeding the minimum. In addition, a 5 million tonne (MT) foodgrain reserve has also been built. “We expect that the EGoM tomorrow may finally reverse the decision,” the official told ET.
Sections within the government were of the opinion earlier that should the basmati export cess be removed, more high-value but non-basmati varieties including Pusa 1121 and Sharbati, could be exported, tightening domestic supply.
By December last year, the food and commerce ministries had begun to change their positions against a changing global rice price scenario. That could swing against the finance ministry’s stand for continuing with the export cess.
Source : The Economic Times