What’s the news?

• The Indian Government Implements Rice Export Restrictions to Stabilize Domestic Prices

Central Idea

• In a bid to control domestic rice prices and safeguard the country’s food security, the Indian government has implemented a series of measures that impact rice exports and production. These steps include prohibiting the export of white rice, imposing a 20% export duty on par-boiled rice and allowing the export of Basmati rice only for contracts valued at $1,200 per tonne or higher.

What is the rice production estimate?

• Rabi season: According to the third Advanced Estimate of the Department of Agriculture and Farmers Welfare, during the Rabi season 2022-2023, rice production was 13.8% less, at 158.95 lakh tonnes tons, compared to 184.71 lakh tonnes during Rabi 2021-2022.
• Kharif season: Kharif sowing data show that rice is sown on 384.05 lakh hectares this year as on August 25 compared with 367.83 lakh hectares during the same period last year.
• Shortfall in the south-west monsoon: In states such as Tamil Nadu, where the Samba crop sowing usually starts in August in the Cauvery delta area, now it will be delayed due to a shortfall in the south-west monsoon.
• El Niño effects: Trade and rice millers say that new-season crop arrivals will start after the first week of September, and that El Niño effects are likely to impact arrivals to some extent. According to M. Sivanandan, secretary of the Tamil Nadu Rice Millers Association, paddy prices that were ₹27 a kg last year this month is at ₹33 a kg now.

Rice Exports Overview

• India’s Global Leadership: India boasts the position of being the world’s largest rice exporter, holding a significant 45% share in the global rice market.
• Export Growth in 2023: During the months of April and May in 2023, rice exports surged significantly by 21.1% compared to the same period in the preceding fiscal year.
• Basmati Rice Export Surge: Notably, the month of May saw a remarkable growth of 10.86% in Basmati rice exports as opposed to May 2022.
• Non-Basmati Exports Rise: Despite the introduction of a 20% export duty on white rice and the prohibition of broken rice exports in September, non-Basmati rice shipments saw a noteworthy increase of 7.5% in exports.

Trends and Data

• Steady Non-Basmati Exports: The trend of rising non-Basmati rice exports has remained consistent over the past three years.
• Basmati Exports Performance: Data from the All-India Rice Exporters’ Association indicates that exports of Basmati rice for the 2022-2023 period surpassed the figures from the previous year.
• August 17 Exports: Up until August 17, 2023, the total rice exports (excluding broken rice) reached 7.3 million tonnes, showcasing a substantial 15% increase in comparison to the 6.3 million tonnes recorded during the corresponding period in the preceding year.

Global Challenges and Impact

• Challenges in Other Nations: Beyond India, several countries are grappling with challenges in rice production and exports.
  • Thailand anticipates a nearly 25% decrease in production in the upcoming year.
  • Myanmar has halted raw rice exports.
  • Adverse crop conditions are reported in Iraq and Iran, affecting their rice crops.

How Will These Measures Help India?

• Food Security Assurance: Banning rice exports ensures a steady supply of rice within the country.
• Price Stability: By restricting rice exports, the government can prevent abrupt spikes in domestic rice prices.
• Supporting Vulnerable Populations: The ban on exports helps maintain affordable prices for rice.
• Managing Supply Chain Resilience: Export bans mitigate disruptions in the rice supply chain. This ensures that even in the face of challenges such as adverse weather conditions or logistical issues, the availability of rice in the domestic market remains consistent.
• Strengthening Local Procurement: By redirecting rice to local markets, the government can enhance its efforts to procure grains for public distribution programs.

Concerns Raised

• Export Revenue Impact: Exporters might experience reduced revenue due to limited access to international markets. This can affect their financial viability and potentially lead to job losses within the export sector.
• Trade Relations: Imposing export bans could strain trade relationships with countries that rely on India as a rice supplier. Diplomatic efforts might be required to manage any potential tensions arising from these restrictions.
• Long-Term Export Effects: Prolonged export restrictions could result in a loss of market share over time. Competing rice-exporting countries might seize the opportunity to strengthen their presence in international markets, impacting India’s export potential once the ban is lifted.
• Global Food Price Influence: Reduced rice supply from a major exporter like India could contribute to global food price volatility, affecting the food security of other nations.
• Efficiency Concerns: In some cases, export bans might lead to inefficiencies in resource allocation. If farmers have surplus produce that cannot be exported, it could result in wastage or inadequate storage facilities.

What can Indian farmers expect?

• Minimum Support Price (MSP) Increase: The government has raised the Minimum Support Price (MSP) for rice, indicating that farmers can anticipate better returns for their crops. This ensures that the paddy purchased by rice millers will be priced higher than the MSP, providing farmers with improved income.
• Price Stability for Farmers: Rice prices are not expected to decline for farmers due to the increased MSP and other measures. This stability in prices can contribute to more consistent and predictable incomes for agricultural producers.
• Controlled Rice Price Climbs: The restrictions on rice exports are designed to prevent steep price increases in the domestic market. Farmers can expect that the government’s efforts to stabilize rice prices will positively impact their ability to fetch reasonable rates for their produce.
• Better Income Prospects: With a higher benchmark price established by the government, farmers are likely to benefit from improved earnings. This elevation in benchmark prices is expected to translate into better market rates for their rice.
• Secured Long-Term Availability: While there may be a minor current increase in rice prices for domestic consumers, the long-term availability of rice is secured. Farmers can anticipate a steady demand for their produce without fear of drastic price fluctuations.

Suggestions provided by exporters

• Reclassification for Export Decisions: Exporters suggest that the government should classify rice as either common rice or specialty rice for export policy decisions, rather than solely categorizing it as Basmati and non-Basmati. This approach aims to tailor policies to different rice varieties.
• Geographical Indication Recognition: Trade policy consultant S. Chandrasekaran proposes that rice varieties with Geographical Indication (GI) recognition should be shielded from general market interventions. This measure aims to preserve the unique qualities of these specific rice types.
• Basmati Rice Export Policy: A Basmati rice exporter, Mohit Gupta, recommends that the government should have allowed Basmati rice exports to continue or set a minimum value for exports, such as $900 per tonne. Gupta argues that such restrictions could impact both exporters and farmers, as demand influences paddy purchases.

Conclusion

• The Indian government’s recent measures to control rice exports and stabilize the domestic market exhibit a multifaceted approach. As stakeholders await further developments and clarifications on government policies, the long-term impact on Indian agriculture and rice exports remains an evolving narrative.

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