‘Minimum Export Price’ Caps on Agricultural Exports

Agriculture has been an integral part of the Indian economy for centuries. Despite the rapid gro­wth of other sectors, it continues to be the primary source of livelihood for a majority of the country’s population (Mathur et al 2006). India is the world’s second largest producer and 10th largest exporter of agricultural products. With available production surplus in key agricultural products, the Government of India aims to promote agricultural ­exports (Singh and Sain 2003) and acc­ordingly announced the Agriculture Export Policy (AEP) in 2018. India aims to leverage agricultural exports for faster economic development as the spill-over eff­ects of improved agriculture income are far higher (Vyas 1999). Accordingly, the specific objectives of India’s AEP were to target a value of $60 billion worth of exports by 2022, diversify agricultural export baskets and destinations, boost high-value and value-added agricultural exports, encourage export of perishable products, and promote novel, indigenous, organic, ethnic, traditional, and non-traditional agri-product exports. On the top it, the policy envisages to stren­gthen involved institutions in agricultural research, agri-extension services, post-harvest management, food processing, and other value-added services for agricultural export promotion. Although, the policy speaks highly of establishing India as a reliable supplier of agricultural products in the international market with a predictable, fair and transparent trade regime, in reality, India’s agricultural products have also been subject to extensive export regulation through a variety of trade policy instruments.

India had a 2.9% share in the world agri­cultural product market in 2021, however, its share is higher in agricultural products like cereals, cotton, marine products, sugar and beverages and spices (Table 1). If we look at specific product levels, India’s share in world ­exports is extremely high for rice (35.5%), marine products (14.9%), sugar (14.9%), cotton (14.7%), and frozen ­bovine meat (9.3%). Even with these trade strengths at global level, the domestic political economy of certain agricultural products is far wider, stronger and revol­ting. An agricultural product like onions has the power to bring down the government, as it is an integral part of the Indian food plate, thus directly affecting the family budget of households. Increasing agricultural prices of certain commodities (onion, potatoes, sugar, edible oil and even cereals) became one of the reasons for the change of power guard in India’s general elections of 1980. The rising prices of onions led to a change in government in 1998 after the assembly elections in Delhi. Considering the adverse effects with regard to their electoral prospects, the political class has been extremely wary of orderly trade of agricultural products in India (Varma and Issar 2017). Accordingly, to address the concerns of consumers in India, the export policy for certain agricultural products has been subject to hyper-regulation. Such unpredictable and knee-jerk reactions to export restrictions have been to protect one section at the cost of another, for instance, export restriction might help the consumers but also adversely affects the welfare of producers (Mitra and Josling 2009). This may be for neither consumer nor producer if a redundant trade policy instrument like “minimum export price” cap(s) is anchored on in order to control exports.