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Informist, Wednesday, Aug 7, 2024

 

By J. Navya Sruthi and Taniva Singha Roy

 

MUMBAI – Despite ample rice stocks and higher-than-normal paddy acreage in the ongoing kharif season, the Centre is prioritising the country's food security over lifting the ban on exports. But the anticipation of a higher production has also compelled the government to free up space before the new procurement season starts in October, market players said. To this effect, it has decided to allow the states to procure rice directly from Food Corp of India.

 

Rice stocks with the Centre as of Jul 1 were up 29% from last year at 32.6 mln tn, the highest since 2005, according to data with FCI. The stocks are far above the Jul-Sep buffer norm of 13.5 mln tn--operational stock of 11.5 mln tn and strategic reserve of 2 mln tn. The total paddy stocks with the government as of Jul 1 were 56.3 mln tn, of which 32.6 mln were rice and 23.7 mln tn was unmilled paddy.

 

The sowing of kharif paddy so far has been higher than last year due to above-normal rainfall in the country. As of Friday, paddy acreage was up 5.3% on year at 27.7 mln ha.

 

In June last year, the government discontinued the sale of wheat and rice under the open market sales scheme to states to control food inflation and to protect consumers. Under the open market sales scheme, the government fixes the price of rice and wheat and sells them to bulk buyers such as states and private millers through electronic auctions.

 

Market participants were keen on the government relaxing restrictions on rice exports to manage the excess stocks, but the Centre last week allowed the states to buy rice directly from FCI under the open market sales scheme, without participating in electronic auctions. States can now also buy far more quantity of rice directly from FCI than from electronic auctions to meet the welfare programme requirements, as the Centre has allowed states and union territories to distribute more than the stipulated 5 kg of free rice per eligible individual under the public distribution system scheme.

 

Following the Centre's decision last week, state governments can now buy rice from FCI at a lower rate of 2,800 rupees per 100 kg, than 2,900 rupees per 100 kg earlier.

 

The government's decision will also push stockists to liquidate their stocks at a lower rate, as households along with those qualified for the public distribution system scheme can buy rice at a subsidised rate provided by state governments, G. Chandrashekhar, commodity market expert and policy commentator, said.

 

However, Rahul Chauhan, the director of IGrain India Pvt Ltd, believes that there will not be much change in prices. "I don't think it will play any major role because, for the last one year, the government has been selling to consumers at subsidised rates and still, if you see six months back, also the prices were on a very high side. So it will not create a major decrease in prices."

 

The all-India average wholesale price of rice today was 3,905.74 rupees per 100 kg, up 279.6 rupees or nearly 8% higher than 3,626.14 rupees per 100 kg last year, according to the consumer affairs department.

 

Traders also do not expect the government's move to allow states to buy rice from FCI to bring prices down due to consumer preference, which would be hard to change.

 

LIFTING OF BAN

The decision to allow states to buy rice from FCI has raised hopes among market participants of the government relaxing the export ban. Devendra Vora, a wholesale broker at Vashi mandi, near Mumbai, said the government will get an idea about the total rice production in India by August-end, and it would take action accordingly.

 

Experts believe the ban on rice exports will only be in force till end of August or September. The government's priority is the country's food security and curbing inflation, after which it can think of allowing exports, said Chandrashekhar. However, he also said that rice production in major producing states such as Punjab, Uttar Pradesh, Bihar, Odisha, and Gangetic West Bengal could be low due to inadequate rainfall.

 

The east and north-eastern parts and northwest India have received below-normal rainfall between Jun 1 and Aug 6, according to the India Meteorological Department. Till Tuesday, rainfall in east and northeast India was 12?low normal at 713.9 mm, and that in northwest India was 310.1 mm, 6% lower than normal.

 

However, the IMD in its forecast for Aug-Sep said weak La Nina conditions are expected to set in by the end of August and these conditions are likely to last over the country till the end of this year. La Nina brings good rainfall to India, while El Nino is associated with a hotter and drier climate over the country.

 

On Tuesday, newspaper Mint quoted NITI Aayog member Ramesh Chand as saying that plentiful rains in key agricultural states may raise rice production further. "I feel the supply side of rice is not worrisome. It's a comfortable situation. So, even if the ban is removed at this time, I think excess quantity will not leave the country," Chand told the newspaper. He also told the business daily that prices have moderated in India and abroad, adding that the export ban will be reviewed at some stage.

 

Market participants expected the government to relax the export duty on rice before the Union Budget for 2024-25 (Apr-Mar) on Jul 23. The industry particularly expected the government to cut the floor price for basmati rice exports and set a fixed duty on exports of parboiled rice, given the excess availability of the staple grain in the domestic market. Currently, basmati rice exports attract a minimum export price of $950 per tn and a 20% duty on parboiled rice exports. However, they were disappointed as there was not much for the sector in the Budget.

 

In September 2022, the government prohibited export of broken rice variety to check soaring prices in the domestic market. Later in July 2023, it also banned export of non-basmati white rice. However, the government allowed export of white rice to a few countries to meet their food security needs following requests from their governments.

 

India's basmati rice exports in Jan-Jun rose to an all-time high of 3.15 mln tn, surpassing the previous record of 2.90 mln tn set in the first six months of 2020, according to data analysed by Informist. Exports of the aromatic rice rose 27.3% in the first half of 2024 from 2.54 mln tn exported during the same period last year.  End

 

Edited by Ashish Shirke

 

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