Issue

Context

• The Union Cabinet has recently approved the Agriculture Export Policy, 2018.
• The Cabinet has also approved the proposal for establishment of Monitoring Framework at Centre with Commerce Ministry as the nodal Department to oversee its implementation.

Background

• There was a time when India used to import agricultural products, but now it is exporting in a big way. However, until now India had no export policy for agro-products despite being a major producer.
• In March 2018 , the Commerce Ministry had released the first draft farm export policy, seeking a stable trade policy regime with limited government interference for key farm items. Reforms in the APMC Act, streamlining of mandi fee and liberalisation of land leasing norms are among the raft of measures suggested in the draft policy.
• The government had imposed a ban on exports of wheat in 2007 and on non-basmati rice in 2008 before lifting it in 2011. It has resorted to curbs on onion exports almost every year and periodically slapped restriction on cotton and sugar exports as well. A ban on exports of key pulses and oilseeds was in effect for a long time.
• The government has come out with this maiden export policy for the farm sector that seeks to double agricultural export to $60 billion by 2022. Exports of agricultural products would play a pivotal role in achieving this goal.
• The policy imposes no restrictions on export of all organic and processed products. However, export policy for primary agricultural products, like onion, would be reviewed periodically on a case-to-case basis depending on price-supply situation.

About

• The Vision of the Agriculture Export Policy is to “Harness export potential of Indian agriculture, through suitable policy instruments, to make India global power in agriculture and raise farmers’ income.”
• The policy has been designed with extensive consultations with states that have agreed to remove a lot of restrictions, including mandi taxes, and APMC (Agricultural Produce Market Committee)-related conditions.
• The implementation of the policy will have an estimated financial implication of over Rs 1,400 crore that will be utilised to set up specialised clusters in different states for different produce to push exports.

Highlights of the Policy

Objectives of the Agriculture Export Policy:

• To double agricultural exports from present US$ 30+ Billion to US$ 60+ Billion by 2022 and reach US$ 100 Billion in the next few years thereafter, with a stable trade policy regime.
• To diversify our export basket, destinations and boost high value and value added agricultural exports including focus on perishables.
• To promote novel, indigenous, organic, ethnic, traditional and non-traditional Agri products exports.
• To provide an institutional mechanism for pursuing market access, tackling barriers and deal with sanitary and phyto-sanitary issues.
• To strive to double India’s share in world agri exports by integrating with global value chain at the earliest.
• Enable farmers to get benefit of export opportunities in overseas market.

Elements of Agriculture Export Policy:

The recommendations in the Agriculture Export Policy have been organised in two categories – Strategic and Operational – as detailed below:

Strategic

• Policy measures
• Infrastructure and logistics support
• Holistic approach to boost exports
• Greater involvement of State Governments in agri exports

Operational

• Focus on Clusters
• Promoting value-added exports
• Marketing and promotion of “Brand India
• Attract private investments into production and processing
• Establishment of strong quality regimen
• Research & Development
• Miscellaneous

Analysis

Need for an Agriculture Policy

• A stable agricultural import and export policy has been a long-standing demand in India.
• India has a track record to open up imports whenever prices of crucial food items (potato, onion, pulses, etc.) start climbing. This hurts local producers. The government being "pro-consumer" backs cheap imports to keep inflation in food prices low.
• There are several instances of sudden increase in export duties and lowering of import duties to keep food prices in check. The Centre cut the import duty on wheat by a fifth when prices increased in 2016-17, leading to imports from Australia and Ukraine flooding the market. Similarly, a zero import duty on palm oil hurts domestic oilseeds farmers.
• By June 2018, India had way more grain in reserve than it needed: 42 million tonne (MT) wheat in stock against a required buffer of 28 MT and 27.5 MT rice where only 13.5 MT was the norm.
• Further, recently the farm exports have also grown by 20 per cent in a year. Agricultural exports of India are currently estimated at $30 billion.
• The new policy aims at doubling agricultural shipments to over $60 billion by 2022.

Significance

• The first ever ‘Agriculture Export Policy, 2018’ would help the government in achieving the target of doubling farmers’ income.
• The policy aims to boost exports of agriculture commodities such as tea, coffee and rice and increase the country’s share in global agro-trade.
• The policy seeks to diversify exports by products and destination and will focus on high value-added farm produce and perishables. At present, rice, wheat and marine products account for about 52% of the total farm exports.
• The policy would focus on all aspects of agricultural exports including modernising infrastructure, standardisation of products, streamlining regulations, curtailing knee-jerk decisions, and focusing on research and development activities.
• It will also seek to remove all kinds of export restrictions on organic products. The policy will promote organic, ethnic and indigenous products.
• Considering the sanitary and phyto-sanitary issues that farm exports usually run into with many countries, the policy will provide an institutional mechanism to pursue market access and tackle barriers.
• The policy will harness export potential of Indian agriculture through suitable policy instruments to make India global power in agriculture.
• The policy strive to double India’s share in world agro exports by integrating with global value chain at the earliest and enable farmers to get benefit of export opportunities in overseas market.

Challenges

• According to some experts, the agriculture policy may prove to be a steep task, given the depressed international market for food grain, sugar, cooking oil as well as dairy and meat products.
• There will be an effort to dispose the excess in the international market, but the challenge is that prices in the international market are already lower than domestic prices.
• The current minimum support price (MSP) of wheat and rice make India food grain quite dear in the domestic market. In such cases, India cannot export it into the international market.
• In India MSP of food-grain is linked to politics, not to world trade and political considerations drive MSPs, instead of world trade considerations.
• India has subsidised sugar prices and can compete in the international market, but countries like Brazil will drag India to the WTO dispute settlement forum.
• An on-going dispute at the World Trade Organization (WTO) can also not be ruled out. The United States has already accused India of subsidising farmers heavily to keep prices low.

Way Forward

• Some experts suggest that India should shift focus to indigenous, unique products from food grain for the international market.
• The farmers must be made aware and they should know when to start sowing, as external factors like global price, impact the domestic situation.
• The government must focus on production of items like edible oil and vegetables, which India import, to help the Indian farmers.
• To operationalise the policy, dedicated clusters could be set up for items like mangoes, pomegranate, bananas, grapes, tea, coffee, turmeric, and marine products, among others.
• The government must set up ‘Brand India’ to promote exports and establish as strong quality regime for exports in which the states can also be extensively involved.

Learning Aid

Practice Question:

The Government of India has recently come up with first ever Agriculture Export Policy, 2018. Discuss how the policy will help double the farmer’s income and boost agriculture exports in India.