Government's fresh measure to curb inflation

In a fresh measure to contain inflation, the government of India has issued a notification to impose a fresh export cess ranging from 5-15% on 15 categories of iron and steel products. The government has also slapped an export duty on basmati rice of Rs. 8000 per tonne to restrain inflation, but this new export duty on basmati rice would be affective on the new contracts.

The Finance Ministry on Sunday has issued the notification to impose the export duty on steel and basmati rice. Earlier, Finance Ministry has announced to frame a duty on steel products up to 20% on April 29, and seek the parliament’s seal over this proposal.

This proposal has been approved in both the houses and it has been sent to President on Saturday to asking her assent over it. The president has assured her assent and government has issued the notification in this regard. The Finance Minister P Chidambaram has announced, ‘as the president would sign on the Finance Bill, the export duties would become applicable from that day.’

According to the notification, the fresh export duty in the range of steel product would be imposed on pig irons, ferrous products, steel ingots, rods, flat rolled products or non-alloy steel and plated or coated with zinc while on the basmati rice; government has imposed $200 per tonne export duty on fresh contracts.

However, on the other hand, the steel makers are surprised over this government’s new move as just a day before issuing the notification, they have met the Prime Minister Manmohan Singh and asked some demands in this regard. After the meeting, the steel makers have cut the prices in the range of Rs. 2000 to 4000 per tonne assuming that no further duty would be imposed on steel or steel products.

While, the PM office has not made any comment on it and following the rule of ‘wait and watch’.

On the export duty on basmati rice, the fresh duty would affect as much as 200 major basmati rice exporters very badly. The government had analysed the less consumption of basmati rice in the country that is only 15% of total basmati rice productivity. However, the ratio of basmati rice is also meager. Out of total 95.68 million tonnes rice produced in the country in 2007-08, basmati and the premium non-basmati were accounted for only 2 per cent.

This move will also affect the farmers more deeply who are expecting to get the higher price of this product. A farmer usually earns an average of approximately Rs 750 per quintal for 26 quintals of basmati grown on an acre of land, as the Food Corporation of India, (FCI) claims.

The government has raised the Minimum Export Price (MEP) for basmati rice by $1200 per tonne from earlier $900 per tonne, while the export of non-basmati rice has been banned by fixing the MEP at $1000 per tonne.

India exports 1.2 million tonne of basmati rice since this season every year and it has shipped the 40% of consignment by April 2008 and a balance of 6,00,000 tones of basmati rice is still pending.