Ban is not the way

Correction of an on-off policy on export of processed food was long overdue

It has been a long time coming, but the Union cabinet's decision last week to permit the export of agricultural processed products, even when that of basic farm products is banned, is a welcome development. It could reverse some of the negative consequences of years of badly timed bans on such exports, especially since 2008. According to Planning Commission data, although India ranks second in fruit and vegetable production globally, less than 7 per cent of this is processed. Compare this with 65 per cent in the US and 23 per cent in China, and the deleterious impact of an on-off policy of permitting export of processed food on the development of this vital arm of the agriculture sector becomes apparent. The commodities in which uninterrupted export will be allowed include cereal flours, value-added onion products like dry onions and a host of milk products, including cheese, butter and curd.

The decision must be placed in the context of the runaway expansion in the cropped area for cereals like wheat and rice. Planning Commission estimates show that production of these commodities has already reached the targets for the terminal year of the 12th Five Year Plan, framing the distortions that have crept into the food economy. At one level this is creating the mountains of grains, and at the other end is the increasing shortage of other nutrition products the economy must import more of. The latest rabi season cropped area data shows the acreage for pulses has again dipped compared to the same period last year.

In this situation, ensuring more takers for these agricultural products will require more than offering a price support mechanism for them. It will call for creating a market for these products and that needs certainty in exports. A well-developed food-processing sector increases farm-gate price, creates an incentive to reduce wastage, and promotes crop diversification. It will also have a positive impact on employment opportunities. This could be the prerequisite for a retail explosion that will benefit all sections of the economy.

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