Mumbai: Pakistani farmers will gain from India’s decision to charge a duty of Rs8,000 for every tonne of basmati rice exported, an industry official said.
According to industry estimates, the duty on basmati exports that the government has introduced to discourage food exports will help Pakistani farmers gain Rs3,000 crore at the cost of their Indian counterparts. The government has also lowered the minimum export price, or MEP, on export from $1,200 to $1,000 a tonne.
In March, the government withdrew the duty entitlement passbook scheme on basmati exports, besides raising the MEP from $1,100 to $1,200 a tonne.
A file photograph of a trader checking the quality of rice at Miryalaguda Mandal, some 150km from Hyderabad
The country exports more than 80% of the 1.6 million tonnes, or mt, of basmati rice it produces. The export of the commodity stood at 1.045mt, worth Rs2,792 crore, in 2006-07. India exported 6,48,231 tonnes of basmati rice, valued at Rs2,028 crore, in April-November 2007.
Basmati exports have come down 31% after the government measures, which were aimed at taming the rising inflation, in the past six months.
“Lowering MEP does not make fiscal sense as Pakistan’s MEP on basmati ($1,300 a tonne) would help Pakistani farmers to gain the Gulf market,” said Anil Mittal, chairman and managing director of KRBL Ltd, which sells basmati under the India Gate brand.
Government and exporters have spent millions of dollars to build the market for basmati rice abroad, resulting in an increased share of the world market at the direct expense of Pakistan, after fighting over 400 litigations on international trade disputes, he said.
Exporters fear that there would be more litigations by buyers if “fixed-price, fixed- quantity” contracts are not fulfilled, Mittal said, adding the export duty will further bring down export demand by 20% immediately.
Exporters would lose over 38% of their business in the current fiscal year that began 1 April, and this loss could also lower the prices at the farm gates.
Vijay Setia, president of All India Rice Exporters Association, said, “Nearly 800,000 farmers are expected to be directly affected in the northern region that include western Uttar Pradesh, Punjab and Haryana, due to the export duty of Rs8,000 per tonne on basmati price imposed by the government.”
“This tax translates to Rs14 per kg tax on paddy, which translates to a 34% tax on farmers. This was the highest tax ever been imposed on an agriculture commodity by the government,” he added.
Nearly nine million people, who are directly or indirectly dependent on this industry, will be affected by the government decision, Setia said.
The loss of farm income could be up to Rs3,000 crore and the loss of minimum farm price would be around Rs1,000 per quintal, according to industry estimates.
The net loss of capital invested by the industry is estimated at Rs3,000 crore.