Mumbai: Saudi importers have threatened lawsuits against Indian rice exporters for default on commitments and have started negotiating with Pakistan and Thailand for its rice requirements.
Domestic exporters have been faltering on commitments following imposition of export duty on basmati rice by the Indian government, a top industry official said.
With a view to discourage exports, the Indian government imposed an export duty of Rs8,000 a tonne on basmati rice exports. It also lowered the minimum export price (MEP) on export from $1,200 to $1,000 a tonne.
“Some rice importers may exploit the situation and file lawsuits against exporters. We are sending wrong signals as India will lose its credibility in the international market,” All India Rice Exporters Association’s president Vijay Setia, said.
Indian exporters conclude 75% of their exports at the time of crop arrival on fixed price-fixed quantity contracts. Nearly 75% of the cost of this price is based on the crop’s arrival prices.
“Now exporters don’t know how they will execute the balance contracts, who work on thin profit margins,” an industry official said.
When the government first fixed MEP at $900 for basmati on 6March, the weighted average of the contracts being shipped were over $1,1001,200. In a matter of less than 18 working days the MEP was raised to $1,200.
While the MEP was catching up with the actual shipment prices, they tended to be lower for the vast bulk of contracts outstanding at all moments in time.