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

Context: Recently, due to the Centre's decision to establish a minimum export price (MEP) of $1,200 per tonne, farmers from Haryana, Punjab, and western Uttar Pradesh have been witnessing a potential loss of ₹8,000-10,000 per acre for their new basmati rice crop.

Minimum Export Price

• About: It is the price below which an exporter is not allowed to export the commodity from India. 

o It is a kind of quantitative restriction to trade and is a short term measure.

o It was first implemented on basmati rice in FY11 to deter exports.

• Reason for its Imposition: Rising domestic retail/ wholesale price or production disruptions in the country.
• Benefits: It stabilize domestic prices, meet domestic demand, prevent black marketing and hording, and protects domestic consumers.
• Ineffectiveness of this measure: It is seen as an outdated concept as it gets easily circumvented e.g.,

o It is duped easily by invoicing at or above MEP for the record but actually pricing and selling the good at prevailing market price.

o Depending on the pre-agreed arrangements, the price differential is later adjusted through future transactions or quality claims.

• Legal backing: The Foreign Trade (Development And Regulation) Act, 1992 allows the Central Government from time to time to formulate and announce the export and import policy and may also, in the like manner, amend that policy.