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

News-CRUX-10     24th August 2023        
output themes

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  • While the government stipulates a MEP from time to time, in market parleys it is largely seen as an outdated concept as it gets easily circumvented.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.