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Informist, Monday, Sept. 30, 2024

 

By Pallavi Singhal and J. Navya Sruthi

 

NEW DELHI/MUMBAI – Following the government's decision to relax export duty on parboiled rice and lift the ban on non-basmati white rice exports, domestic rice prices surged by INR 300-400 per 100 kg Monday. Despite the impending arrival of the new crop in mid-October, paddy prices are expected to stay above the minimum support price.

 

While traders anticipate a 3% price rise above the minimum support price, agricultural experts and industry players predict a more significant rise of around 10%.

 

“There is a huge inventory of non-basmati white rice, which has become the reason to open up exports," said Anand Chandra, co-founder and executive director at Arya.ag, which operates more than 3,000 warehouses for wheat and rice across the country. "With firm global prices and on the back of a 6-7?ll in paddy output due to crop damage in parts of Maharashtra and Andhra Pradesh, we see prices of rice at least 10?ove MSP.”

 

However, B.V. Krishna Rao, president of The Rice Exporters Association, a non-basmati rice association, sees prices rising only 3%. “Prices may not rise in big percentage terms, but prices are expected to rise 2-3?ove MSP on strong demand,” he said. For the kharif marketing year 2024-25 (Oct-Sep), the government increased the minimum support price for common paddy by 5% to INR 2,300 per 100 kg and for grade A paddy by 5% to INR 2,320 per 100 kg.

 

Prices of Sona masoori, a premium non-basmati rice variety, were at INR 6,400-6,450 per 100 kg, up INR 300-400 from Saturday, Ravi Shankar, a trader from Bhavanipuram in Andhra Pradesh, said. Prices of other premium non-basmati rice varieties were also up by similar margins to INR 5,600–5,800 per 100 kg. Prices rose on account of the government’s decision Friday to allow non-basmati rice exports at a minimum export price of $490 per tonne and to lower export duty on parboiled rice from 20% to 10%.

 

The steps are meant to help farmers, consumers, and the private trade, Deepak Pareek, an independent agricultural economist, said. “The steps have been brought in to help farmers by increasing prices," Pareek said. "The step will force private industry to buy from them as stocks deplete. Industry will benefit as they can finally jump back in the market. This will also reduce pressure on the government to procure the grain from farmers at MSP,” he said. Pareek, too, said prices of the grain would be “well above the minimum support prices”.

 

The decision on the level at which to keep the duty was taken keeping in mind international prices of similar varieties, Prem Garg, president of the Indian Rice Exporters’ Federation, said. “Pakistan was selling non-basmati white rice at $520 per tonne as of Friday," he said. "India imposed a minimum export price of $490 per tonne, which will keep India’s exports competitive.”

 

However, according to Garg, international prices of the commodity fell almost $50 per tonne soon after India announced the lifting of restrictions. “Global trade reacted sharply to the order,” he said. India is the world's biggest rice exporter. The country accounted for nearly 40% of the global rice trade in 2021-22 (Apr-Mar), exporting a record 22 million tonnes to 140 countries.

 

Exports of broken rice have not been opened up as the government probably wants to divert some of it for ethanol production, Garg said.

 

Over the past 15 months and more, amid persistently high inflation and supply worries as crop production took a hit due to erratic rainfall, India took several steps to improve the domestic situation. The government, which had banned the export of broken rice in September 2022, halted exports of non-basmati white rice in July 2023, and imposed 20% duty on the export of parboiled rice on Aug. 25.

 

With the export curbs being eased, fears of a rise in food inflation, which has been sticky for a long time, looms large. However, agricultural economist Gopal Krishan Sood sees only a moderate risk of inflation. “I do not assess too much risk because of the timing the restrictions have been opened at," he said. "Most of the exports will begin from the pipeline stocks, which will be supported by local harvests that begin coming into markets soon. This will ensure domestic stocks do not go down.”

 

Moreover, he said, with the outlook for not just rice but other summer and kharif crops looking good, inflation risks are likely to be minimised. "With a high base, I expected muted inflation in the commodity, notwithstanding higher actual prices,” Sood said.  End

 

US$1 = INR 83.79

 

Edited by Rajeev Pai

 

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