Due to higher income from agriculture, the rural economy has a good chance of recovery this year. Agile decision-making is necessary to take advantage of current global prices. Decisions to ease restrictions on trade need to come as easily as the decisions to impose them. The prospects of Kharif output appears to be quite promising and the government has already begun to change the export policy with regard to a few crops, particularly the soybean.
The hound reality suggests that similar measures are needed to be taken up with regard to rice and sugarcane. In expectation of a good harvest, the union government announced a number of decisions on trade. In addition, some more easing of export restrictions on non-basmati rice and sugar can be expected in the next couple of months.
Edible oils: Protecting farmers
The most important announcement was to raise import duty on edible oils as the sown area under soybean is 2.16 lakh hectares more than normal. The domestic prices of soybean were about 35 per cent lower than the MSP as they were hovering in the range of Rs 3,200 to Rs 3,700 per quintal while the MSP is Rs 4892 per quintal. These prices were almost at par with the prices ten years ago. Madhya Pradesh is a major soybean-producing state and it is the home state of the agriculture minister.
The government did well to protect the soybean farmers from these low and absolutely unremunerative prices. On September 13, 2024, basic customs duty (BCD) of 20 per cent was imposed on crude palm oil, crude soyoil and crude sunflower oil. So far, the BCD was zero and imports attracted only 5.5 per cent of Agriculture Infrastructure and Development Cess (AIDC). The overall import duty on these oils now will now be 27.5 per cent.
The BCD and AIDC on imported refined palm oil, refined soyoil and refined sunflower oil will now be 35.75 per cent against the earlier rate of 13.75 per cent. Notwithstanding higher duties, procurement by government agencies may still be required, at least in the early days of market arrivals.
Globally, soymeal prices are lower than last year. India's soymeal is non-genetically modified, but exporters are not able to get a premium for that. The government needs to highlight this through media campaigns. Exports to Iran, Bangladesh and other Southeast Asian countries can lift soymeal prices and it can enable soybean processors to pay at least the MSP to farmers.
If farmers do not get a remunerative price for soybean, it is possible that the farmers may switch to paddy next year as (due to the bonus declared by the state government) they receive Rs 3,100 per quintal for paddy while its MSP is Rs 2,183 per quintal.
Rice: Export ban needs to go
The other crop of concern is rice. Due to good monsoon distribution, India can expect a record crop of up to 138 million tonnes. Sown area under paddy is about 16 per cent higher than last year. Despite poor monsoon rainfall in 2023, India produced 136.7 million tonnes of rice. The rice stocks in the central pool on August 1, 2024, were 45.5 million tonnes, the highest in the last ten years.