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Commodities dearer despite export ban

April 28, 2007 14:11 IST

Prices of most commodities on which the government imposed an export ban to check inflation have risen sharply, touching an all-time high in cases.

Over the past 12 months, the government has embargoed the export of sugar, pulses, wheat and skimmed milk powder.

The ban was imposed on these items of mass consumption on the assumption that they were among a basket of agri-commodities contributing to inflation.

The ban on sugar exports was lifted on December 18 last year for Advance Licence (companies that imported duty-free raw sugar between 2002-03 and 2004-05, with an obligation to re-export) and on January 11 for Open General Licence. The ban on the other three commodities stays.

Prices of skimmed milk powder, on which an export ban was imposed on February 1, have jumped from a pre-ban price of Rs 120-125 per kg to an all-time high of Rs 135-140 per kg.

"This is an all-time high for skimmed milk powder and if the government does not ban casein (a milk protein used independently in many foods as a binding agent) exports, prices will continue to rise," said Kuldeep Saluja, managing director of Sterling Agro Industries, which sells milk products under the Nova brand.

The ban on skimmed milk powder is in place till September.

For pulses, the export ban was imposed on June 22, but supply-side pressures owing to stagnant production have allowed no let-up in prices.

Prices of tur jumped from a pre-ban price of Rs 1,930 per quintal to Rs 2,300. Urad prices have declined marginally from Rs 3,070 to Rs 3,000. Only chana prices have fallen significantly, from Rs 2,500 to Rs 2,200 per quintal.

"The fall in chana prices has little to do with the export ban. Prices came down primarily because of a better crop this year and the large-scale import on the government account," said Dipak Shah, a Maharashtra-based pulses trader.

This is roughly also the case for wheat on which an export ban was imposed on February 9 for the whole calendar year. Wheat prices have dropped from Rs 1,070 to 950 per quintal. But this is more because this is a lean period for prices with the new crop in the process of being harvested.

In case of sugar, prices came down significantly during the ban because of record production. Prices continued to plummet even after the ban was lifted because of oversupply.

To put things in perspective, exports in most of these cases did not constitute a sizeable portion of the output in these commodities.

In 2005-06, for example, wheat exports stood at 0.74 million tonnes, which was a mere 1.07 per cent of the 68.6 million tonnes produced; sugar exports of 0.31 million tonne came to 1.61 per cent of the 19.2 million tonnes of production, whereas exports of 0.44 million tonnes of pulses were 3.28 per cent of the 13.4 million tonnes produced.

Only in the case of skimmed milk powder did exports constitute a sizeable 10 per cent of production or about 50,000 tonnes.

Ajay Modi in New Delhi
Source: