After Wheat, Government ‘Regulates’ Sugar Exports


After Wheat, Government ‘Regulates’ Sugar Exports

The  government seems focussed on controlling food inflation. After banning export of wheat, it has now ‘restricted' sugar shipments, besides scrapping all duties and cesses on crude soyabean and sunflower oil imports.  Retail inflation in edible oils was at 17.28 per cent year-on-year in April.

Sugar production estimated at an all-time high: Commenting in these policy changes, The Indian Express  writes export bans and ‘restrictions’ do not make sense. Sugar production in 2021-22 (October-September) is estimated at an all-time high of 35.5 million tonnes (mt). With opening stocks of 8.5 mt, the total availability at 44 mt is more than comfortable to meet the domestic consumption requirement of about 27 mt. “Unlike in wheat, where government estimates of the size of this year’s crop seem highly optimistic, there’s no debate over sugar output. And its prices have hardly risen; nor do they look like going up.”

But it needs to be noted that the government  has not banned, but only decided to ‘regulate’ and allow export of sugar 'with specific permission’. It has further sought to cap total exports at 10 mt for 2021-22. Presently,  the contracts signed (around 9 mt) and quantities actually shipped out (7.8 mt) have already surpassed last year’s record of 7 mt. The exports then may not cross 10 mt. All the more reason for not imposing any ‘restrictions’.

Enable supply response - policy uncertainty not the answer: The government’s concern with food inflation — at 8.38 per cent in April, it was higher than the overall annual retail inflation of 7.79 per cent — is understandable. The Indian Express appreciates “its recent decision to slash excise duties on diesel and petrol. Since there’s not much that the Reserve Bank of India can do about fuel and food inflation, a lot hinges on the government’s fiscal and supply-side management measures. But such measures should not be turning the back on reforms. Export curbs and stocking limits (imposed last year on the pulses trade) will make farmers and agri-businesses wary of expanding acreages or investing in supply chain infrastructure and developing markets. The government needs to realise that enabling supply response, and not creating policy uncertainty, is the only durable solution to supply-side inflation.”


Rice may be next: government denies

Despite the government denial, Pratik Parija & Vrishti Beniwal of Bloomberg believe rice may be India’s next food protectionism target. This according to analysts could have a devastating impact on global food security as it’s an important staple.

India’s curbs on wheat and sugar exports have already sent shock waves through global markets. A similar move on rice by the No. 1 exporter at a time when crops like wheat and corn are soaring would threaten to plunge millions more into hunger and boost inflation  risks.

Radhika Piplani, an economist at Yes Bank Ltd says “it’s a matter of time when restrictions on rice exports might be considered,” said. The challenge will be to see if such curbs will lower food prices and within what time frame, she added.

Parija and Beniwal say “India has stockpiled more than enough rice and prices have been under control. Rice is closely related to wheat in Indians’ diet and the government’s food ration system. State purchases of wheat for the food aid program are expected to be less than half compared with the year earlier and the government plans to distribute more rice, spurring expectations that authorities will want to ensure ample supplies of cheap rice domestically.”

“These public reserves of rice are more than adequate to meet the country’s public distribution needs, even with the enlargement of rice rations due to the prevailing wheat situation,” said Shirley Mustafa, an economist at UN Food and Agriculture Organization.

The government may consider limiting rice exports to ensure domestic supplies and prevent a rise in prices, the Economic Times reported. A committee led by the Prime Minister’s Office is doing a product-by-product analysis of essential commodities, including non-Basmati rice, and swift measures are expected if there are any signs of a price rise, the paper said, citing an unnamed official.

Rice has been the one staple grain that’s helping to keep the world food crisis from getting worse. Unlike wheat and corn, which have seen prices skyrocket as the war in Ukraine disrupts supplies from a major breadbasket, rice prices have remained subdued due to ample production and existing stockpiles.

That outlook can change if India decides to curb rice exports. It may spur other countries to follow a similar playbook, as it did during the 2008 food crisis, when Vietnam also restricted rice shipments. Asia produces and consumes about 90% of rice, with India accounting for 40% of global trade.

A decision to limit rice exports will depend on how prices fare in the coming weeks, said Suvodeep Rakshit, senior economist at Kotak Institutional Equities. Rice is about to be sown and output depends on the weather. If the monsoon is erratic and rice prices jump, it’s likely that exports will be curbed, he said.


Climate costs: emissions-embodied exports

Poornima Varma (faculty and chairperson at the Centre for Management in Agriculture, Indian Institute of Management Ahmedabad) cautions  that although the Ukraine conflict has  created export opportunities for countries such as India, “this well-celebrated export spike needs to be viewed with a pinch of salt.”

Data available from the Organisation for Economic Co-operation and Development(OECD) indicates that India is one of the leading exporters of carbon emissions-embodied products, and that there is a steady increase in the total carbon emissions embodied in exports.

æNet CO2 exports can be calculated by taking the difference between carbon emissions-embodied exports and carbon emissions-embodied imports. The striking difference between China and India is that while China’s net exports began to decline from 2007-08, net exports in India started to steadily increase in that period. While India’s net exports of carbon emissions were observed to be the lowest in 2007 (-11.6 million tonnes), at present the net exports are 55.4 million tonnes. Another way of calculating the net export of carbon emissions is by taking the difference between domestic carbon emissions embodied in gross exports and foreign carbon emissions embodied in gross exports. By using this definition also, there is a steady increase in net exports of carbon emissions from India. In 1995, net exports were 75.8 million tonnes; it increased to 372 million tonnes in 2018.”

India’s recent export performance has been attributed to petroleum products, electronics and chemicals.


‘India is virtually exporting some of its depleting natural resources such as water’

Coming to the exports of agricultural and food products, Varma writes “India is virtually exporting some of its depleting natural resources such as water through exports. India is the leading exporter of rice in the world market. Given that rice is a water-intensive crop, India is indirectly exporting water to other countries. This virtual water trade will have an adverse impact on long-term sustainability and food security of the country although there has been an overall improvement in water-use efficiency….”

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