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EU to end tax breaks for basmati
NEW DELHI: Brussels has barricaded itself against basmati. The EU has decided to stop giving duty-free access to basmati from India and Pakistan.
It will hold talks with both countries on the compensation it will pay for their loss of exports.
With exports worth $119m in jeopardy, India will have to either negotiate a fresh fixed quantity at zero duty (a Tariff Rate Quota), or ask EU for separate zero-duty status only for the more expensive traditional basmati.
Unfortunately, both these routes are fraught with trouble. A TRQ will cap further growth of basmati exports to this premium market, while preferential treatment for traditional basmati could mean a blow to the livelihoods of Indian farmers growing cheaper hybrids like Pusa basmati.
EU has been giving basmati zero-duty access since 1995. This allows it to compete better with locally-grown subsidised rice. But the EU believes that such unlimited access has boomeranged because basmati has almost edged out the local offering.
Consequently, as part of the agricultural reforms package unveiled last week, the European Commission (EC) has decided to impose fresh barriers on this premium rice.
As part of the CAP reforms, the EU Council has authorised the EC to begin negotiations with all its trading partners for rice — US, India, Pakistan, and Thailand — to end commitments on market access made to them under Headnote 7 of the WTO.
Obviously, what EU puts on the table before India and Pakistan as part of its new proposals for market access will be the crucial question over the next few months.
The US, which has always protested zero-duty access to basmati when its own rice is taxed, wants EU to clamp down by offering a fixed quota to basmati. Thailand, exporter of Jasmine rice, also supports this way of capping Indian exports.
India, as the largest exporter and the world’s only producer of traditional basmati, would prefer a separate new dispensation for it with no quantity restrictions.
EU itself appears open to the idea because it is willing to create new tariff lines by means of a breakout from existing lines. But Pakistan is unlikely to accept this special advantage to India because Pakistan does not produce any traditional basmati itself.
The Indian government is also likely to face problems internally because exporters and farmers growing Pusa and other hybrid basmati would resent losing out in the European market.
MGR Archive 1.7.2003
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Region Type Price  
Russia Rapan $ 700
USA Jupiter Rice $630
USA Calrose #1 $830
USA Calrose #1 Paddy $480
EU Prices Baldo €660
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