India rethinks frequent ban on export of foodgrain, other farm commodities.

NEW DELHI: India's frequent ban on export of foodgrains and other farm commodities may soon become a thing of past as the commerce department is working on a policy to allow traders meet their exports obligations even in times of domestic shortages through imports.

The move will help India restore some global credibility as it has often faced flak for its banning spree.

"Once we are ready with the proposal, it will be sent to the finance ministry," a commerce department official told ET.

New Delhi's flip-flop on exports of onions, sugar and cotton in particular has been criticised at the international foras such as World Trade Organization and G-20, creating fears of India being branded as an unreliable supplier.

The G-20 meeting of farm ministers in Paris last year underlined the need to oppose export bans, especially at a time of humanitarian crisis.

Moreover, banning exports at the slightest pretext of domestic shortage has also led to bitter exchanges among commerce, food and agriculture ministries, as seen in the case of cotton exports.

The proposal seems to have the blessings of the finance ministry as former finance minister Pranab Mukherjee raised the issue in the discussion on the Union Budget in May this year.

"We have to maintain our presence in the international market and meet our commitments," Mukherjee had said, adding it is all right to export something that the country produces even if it has to be re-imported later if the need arises.

Despite having millions of tonnes in wheat stock, the exports in 2009-10 and 2010-11 was only 3.5 lakh tonne.

The exports industry, too, has been complaining for long that short-term policies affect decision making.

"Our reputation as an exporting nation suffers because of our fast changing policies. It creates uncertainties not just for exporters but also for our importers .


We are not seen as reliable suppliers," said Abinash Verma, director general, Indian Sugar Mills Association. The commerce department is confident the proposed policy will work.

"If we implement the proposed policy, an exporter can continue serving his customer, provided he is ready to import from other sources if there is a shortage at home," the official said.

Experts say the concept is fine, but it needs to executed with care.

"When exports continue at the time of shortages, the impact on prices is much more than the demand-supply gap because of speculation," says Biswajit Dhar, director general, Research and Information System for Developing Countries. So, when the government decides against export ban, it has to simultaneously think of ways to control speculation, Dhar adds.

The commerce department had earlier proposed unrestricted exports of all major commodities under a limited ceiling, but it was not appreciated by food and textile ministries.

Source : economictimes.indiatimes.com