Frequent changes in agri-trade policy in the form of import duties and minimum export prices "creates instability" for any investment in agro-processing industry, the Economic Survey 2015-16 today said suggesting the government to discontinue such practices.
"Frequent changes in the policy parameters/goal posts of trade in agricultural products in the form of changes in import duties and minimum export prices, etc, create instability of policy for any investment in the gro-processing industry," the Survey said.
These changes in policy parameters have limited impact on the price the consumer pays, because of the time taken to arrive at the decision and the same translating into additional/ reduced supplies, it said.
"It certainly does not impact the farmer who has received his remuneration based on the price prevailing at the time the produce leaves the farm gate," it noted.
It strongly suggested that the entire activity of changes in the policy parameters vitiates the concept of a market and needs to be discontinued.
According to the survey, high prices of commodities in a particular year do not translate into benefits to the farmer in the same year, but create expectations, possibly not rational, of the same in the next year, enhancing cropped area in the next year/cropping season, leading to oversupply and reduction in prices and so incomes.
During 2015, the import duty on sugar was increased from 25 per cent to 40 per cent, while that of crude and refined edible oils has been raised from 7.5 per cent to 12.5 per cent and 15 per cent to 20 per cent respectively in November 2015.
Further, import duty on wheat was first raised from 'zero' to 10 per cent in August 2015 and from 10 per cent to 25 per cent in October 2015.
The following policy changes were made in the last few years to benefit farmers and to incentivize the development of the agro-processing sector, and enhance farm productivity.
Export of edible oils in branded consumer packs of up to 5 kg has been permitted with a minimum export price of USD 900 per tonne since April, 2014. Export of rice bran oil has been allowed from April, 2015.
Export of Kabuli Chana and 10,000 tonnes of organic pulses per annum have been allowed. Since 2011, export of rice and wheat has been permitted.
Since February 2013, processed and/or value-added agricultural products had been exempted from export restrictions/bans even if their base produce is subject to an export ban. That apart, export of cotton is free without any restrictions.
The agriculture sector is critical for achieving the objectives of food security and price stability. Therefore, tariff protection and support accorded to this sector remains higher than that of manufacturing and services sectors.
The average tariff protection for agriculture (36.4 per cent) is substantially higher than that for non-agricultural products (9.5 per cent).
