Thursday, December 23, 2010

Don’t control exports

No one gave them much attention. Now that the government relaxed the export ban, prices of cotton have improved. But why not earlier? In fact, why control export of cotton anyway? We know the corruption possibilities with discretionary quantitative controls, with all the shenanigans being reported. There is hoarding of onions, we are told. But of course, yes. Some of us never advocated completely free markets. We got that lecture. I and some others like-minded in the government always wanted a strategic presence for the state with rule-based intervention systems. When we present those in practical terms in policy reports, the government rejects them. When they do that I know enough economics to say, be fair. At the least be consistently practical within our own reasoning systems.

Whatever we may say, onion prices are not coming down in a significant manner in the next six weeks. But for the future let us have some semblance of a rule-based policy. Allow trade with variable tariff policies, an option that has been wrongly rejected over my head and those of all the sensible chairmen of the Commission for Agricultural Costs and Prices. Don’t control exports. Let the tariffs take care of the difference between what the farmer should get and the unstable world price. Do try to intervene selectively to ride the cycle at home. 

From Tears for onion policies by Y K Alagh         

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