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Informist, Thursday, Aug 22, 2024

 

By Pallavi Singhal

 

NEW DELHI – The Centre is looking at the possibility of tweaking the export duty on non-basmati parboiled rice, two senior government officials told Informist. Currently, an export duty of 20% is levied on 'cost including freight'. There is a proposal to replace the 20% export duty on a 'cost including freight' basis with a 20% duty on a 'free on board' basis, or a levy of $90 per tn on outbound shipments, the officials said. 

 

A duty on 'cost including freight' requires the exporter to pay tax on the total cost of the goods, freight and insurance, whereas a duty on 'free on board' requires the exporter to pay tax on the cost of the goods loaded onto the vessel. In the latter case, the freight and insurance charges are paid by the importer. The shift would enable the exporters to bring down their prices.

 

A decision on tweaking the duty is likely only after the government assesses the final sowing estimates of kharif paddy next month, one of the officials  said.

 

In August last year, the government imposed a 20% duty on a 'cost including freight' basis on parboiled rice exports to reduce food inflation. Previously, a 20% duty was applied to the 'free on board' value. The government imposed the duty on 'cost including freight' to augment the domestic supply. The duty, which was initially notified till Mar 31, was later extended indefinitely even before the deadline.

 

The Agricultural and Processed Food Products Export Development Authority has already proposed to the government to tweak duty to a per tn basis.

 

The proposal to levy the duty on a per tn basis is aimed at curbing under-invoicing by exporters wanting to avoid higher payment on account of the current levy of 20% on this variety of rice. The traders are also asking for this to bring their exports in line with the global norms of charging duty on a per tn basis.

 

India exported 7.6 mln tn of parboiled rice in 2023-24 (Apr-Mar), down 3.5% on year, according to the commerce ministry data. In the first three months of 2024-25 (Apr-Mar), the country exported 1.9 mln tn of the commodity, down 5% from a year ago.

 

“The duty was put in place to dissuade exporters from exporting huge amounts of the commodity as prices increased,” the second official said. “However, we are unable to remove the duty despite high stocks as prices are still reigning high,” the official said. The retail price of rice was 44 rupees per kg on Tuesday, up 5.7% on year. Wholesale prices of the commodity were at 3,932.4 rupees per 100 kg, up 7% from a year ago, according to Department of Consumer Affairs data.

 

“The government will wait for the final sowing numbers before taking any decision. We want to ensure we are in a comfortable position before easing any curbs. Higher stocks and sowing should also be reflected in prices soon. Once that happens, we will be in a comfortable position to bring down duties,” the official added.

 

Annual consumption of parboiled rice in India is a mere 2 mln tn, and is not part of the Public Distribution System. The total rice stocks with the Food Corp of India have risen to record levels. Rice stocks as of Aug 1 were the highest since 2005 at 32.8 mln tn. Rice stocks have risen nearly 35% on year and 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 sown area under paddy this year is also 6% higher from a year ago at 36.9 mln ha so far, the government data released Tuesday showed.

 

Progress in sowing of paddy and availability of ample rice stocks with the Centre have led the government to allow grain-deficient states to buy rice from Food Corp of India through open market sales, without participating in electronic auctions. This indicates the government’s confidence in managing rice inflation, said a trader.   End

 

Edited by Saji George Titus

 

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