MINIMUM EXPORT PRICE (Syllabus: GS Paper 3 - Economy)

Context: The Centre may be considering a minimum export price (MEP) for a host of specialty rice, including the basmati variety, to ensure that unscrupulous traders don’t ship excess quantities abroad.

• India had banned export of all non-basmati white rice a few weeks ago to check domestic price rise but it allowed exports of basmati and parboiled rice.

Minimum Export Price (MEP) 

• It is the price below which an exporter is not allowed to export the commodity from India. 
• MEP is imposed in view of the rising domestic retail/ wholesale price or production disruptions in the country.
• MEP involves “fixing a floor price” below which an exporter shall not sell the product to an overseas customer.
• While the government stipulates a MEP from time to time, in market parleys it is largely seen as an outdated concept as it gets easily circumvented.  
• The system is duped easily by invoicing at or above MEP for the record but actually pricing and selling the good at prevailing market price.
• Depending on the pre-agreed arrangements, the price differential is later adjusted through future transactions or quality claims.
• With exporters having mastered this route, MEP has become an ineffective instrument to restrict commodity export or contain domestic price rise.