Indian farmers taxed $169 bn via export bans or restrictions in 2022: OECD report
- October 31, 2023
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Indian farmers taxed $169 bn via export bans or restrictions in 2022: OECD report
Subject :Economy
Section: External Sector
Context:
- Indian farmers were implicitly taxed $169 billion in 2022 due to export bans, duties or permits on several commodities like wheat and rice, to stabilize prices for consumers, the latest Organisation for Economic Co-operation and Development (OECD) assessment on agricultural policy and support globally has pointed out.
Details:
- This drove the overall market price support (MPS) to farmers in negative in 2022.
- India’s negative MPS policy taxation constituted over 80 per cent of all such taxes globally in 2022.
- Among 54 countries analyzed in the report, implicit taxation to farmers was about $200 billion.
- Commodities affected included various types of rice, wheat, sugar, onions, and related products (like wheat flour).
- Other emerging economies which had a negative MPS, managed to offset it through other budgetary support, bringing the net support in positive figures.
Market price support (MPS):
- MPS is the benefit or loss farmers receive by having domestic prices that do not reflect those of world prices.
- It is the annual monetary value of gross transfers from consumers and taxpayers to agricultural producers, arising from policy measures that create a gap between domestic market prices and border prices of a specific agricultural commodity, measured at the farm gate level.
- In India’s case, different budgetary transfers to farmers in the form of large subsidies for variable input use, such as fertilizers, electricity, and irrigation water, PM-KISAN, did not offset the price-depressing effect of domestic marketing regulations and trade policy measures.
- India introduced export bans, duties or permits on several commodities in 2022 to stabilize fluctuations in domestic prices following the outbreak of war in Ukraine and also due to the 2022 heatwave.
- The export restrictions directly affect India’s reliability as a supplier and exacerbate the persistent challenge of low farm incomes.
Producers’ support estimates (PSE):
- Developed by OECD
- It is the international measure of a government’s budgetary and other subsidies to farmers.
- OECD uses this for its annual tracking of global agriculture supports. In simple terms, this measure estimates what a farmer receives at the farm gate.
- Producer support was estimated to have declined in 2022 due to falling market price support, but still remains higher than pre-pandemic levels.
- The types of support considered to have the potential to be the most distorting are payments based on output and payments based on the unconstrained use of variable inputs.
- These forms of support are much more prevalent in emerging economies than in OECD nations.
Minimum export price (MEP):
- It is the price below which an exporter is not allowed to export the commodity from India.
- It is imposed in view of the rising domestic retail / wholesale price or production disruptions in the country.
- It is a kind of quantitative restriction to trade.
- Government fixes MEP for the selected commodities with a view to arrest domestic price rise and augment domestic supply.
- This is intended to be imposed for short durations and is removed when situations change.
- The removal of MEP helps farmers / exporters in realising better and remunerative prices.
- MEP was first implemented on basmati rice in FY11 to deter exports, and is typically implemented to contain surging domestic prices because of production disruptions.
- Legal backing:
- As per section 5 of the The Foreign Trade (Development And Regulation) Act, 1992, the Central Government may, from time to time, formulate and announce by notification in the Official Gazette, the export and import policy and may also, in the like manner, amend that policy.
Source: Live Mint