Minimum Export Price
Minimum Export Price (MEP) is the price below which an exporter is not allowed to export the commodity from India. MEP is imposed in view of the rising domestic retail / wholesale price or production disruptions in the country. MEP is a kind of quantitative restriction to trade. As per a 2005 study by OECD, around 14 of the WTO members had adopted a Minimum Export Price Policy.
Government fixes MEP for the selected commodities with a view to arrest domestic price rise and augment domestic supply. This is intended to be imposed for short durations and is removed when situations change. The removal of MEP helps farmers / exporters in realising better and remunerative prices and would also help in earning valuable foreign exchange for the country.
For instance, minimum Export Prices (MEP) of US$ 450/MT on Potato was imposed on 26th June, 2014 to augment domestic supplies in view of rising retail and wholesale prices in domestic markets. This continued till 20th February, 2015, for almost 8 months, uptill surplus supply of potato in the domestic markets and consequent rapid fall in price (In domestic and retail) led to its removal by Department of Commerce vide another Gazette Notification.
Generally, MEP imposition is restricted to essential commodities like potatoes, Onions, rice, edible oils etc.
Notifications on MEP issued by Department of Commerce may be seen from the website of Director General of Foreign Trade (DGFT). However, actual price fixing may be done by other concerned agencies, like, say National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) in case of Onions. MEP decisions are generally taken at the Cabinet level. The requests for changes in MEP are brought to the Cabinet by the line ministries, such as the Agriculture Ministry, who request for changes generally on ad-hoc basis. It is not a formula based imposition.
Legal backing for MEP
As per section 5 of the 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.
As per the Foreign Trade Policy (FTP) of the Government, exports and imports shall be free’ except when regulated by way of ‘prohibition’, ‘restriction’ or ‘exclusive trading through State Trading Enterprises (STE). Section 2.07 of the said policy narrates the “principles of restrictions” for export and import. The list of ‘Prohibited’, ‘Restricted’ and ‘STE’ items can be viewed by clicking on ‘Downloads’ at http://dgft.gov.in.
As per Section 2.39 of the said Foreign Trade policy all goods may be exported without any restriction except to the extent that such exports are regulated by Indian Trade Classification (Harmonised System) [ITC (HS)] of Exports and Imports or by any other provision of Foreign Trade Policy (FTP) or any other law for the time being in force. Generally, export policy, including Minimum Export Price restrictions are outlined in Schedule 2 of the ITC- HS. Director General of Foreign Trade (DGFT) may, however, specify through a public notice such terms and conditions according to which any goods, not included in ITC (HS), may be exported without an Authorisation.