MINIMUM EXPORT PRICE (Syllabus: GS Paper 3 – Economy)
Context: Recently, Basmati exporters and millers in Haryana, Punjab, and western Uttar Pradesh halted their rice purchases from 300 mandis (wholesale markets) across these states due to the government's recent decision to maintain the minimum export price (MEP) at $1,200 per tonne.
- The MEP is too high for India's basmati exporters to compete in the global markets
Minimum Export Price
- About: It is the price below which an exporter is not allowed to export the commodity from India.
- Reason of its imposition: 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.
oWhile the government stipulates a MEP from time to time, in market parleys it is largely seen as an outdated concept as it gets easily circumvented.
oThe system is duped easily by invoicing at or above MEP for the record but actually pricing and selling the good at prevailing market price.
oDepending on the pre-agreed arrangements, the price differential is later adjusted through future transactions or quality claims.
oWith exporters having mastered this route, MEP has become an ineffective instrument to restrict commodity export or contain domestic price.
- Legal backing: As per section 5 of 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.
