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Govt bans non-basmati exports, cuts incentive

Govt bans non-basmati exports, cuts incentive
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First Published: Sun, Oct 14 2007. 08 37 PM IST

FCI chairman Alok Sinha says the new bonus on the rice purchase price will ensure ­better arrivals and procurement
FCI chairman Alok Sinha says the new bonus on the rice purchase price will ensure ­better arrivals and procurement
Updated: Tue, Oct 16 2007. 01 59 AM IST
New Delhi: In a double blow to Indian rice exporters, not only has the government banned the export of non-basmati rice but it has also cut a key export incentive, known as duty entitlement pass book rate (DEPD), by half, from 3% of export revenue to 1.5%.
And this has some rice exports puzzled and worried
“The logic of the export ban is to protect domestic food security. But non-basmati also includes premium varieties of rice, which are not procured for public distribution, but export of such varieties get seriously affected,” said Karan Chanana, managing director of rice exporter Amira Foods India Ltd.
FCI chairman Alok Sinha says the new bonus on the rice purchase price will ensure ­better arrivals and procurement
The All India Rice Exporters Association has called for an exemption of such premium rice from the blanket ban on non-basmati export.
“There are about three 300,000 tonnes of rice lying at the ports ready to be exported against orders. All this will now have to be sold in the domestic market. Moreover, we have built relationships with the buyers over years. What happens to that?” asks Prem Garg, managing director, Shri Lal Mahal Group, exporters of basmati and non-basmati rice.
Garg noted that every year, out of 90 million tonnes (mt) of non-basmati rice produced in India, only a “minuscule” portion is exported. India exports about 1.2mt of basmati and 3.8mt of non-basmati rice.
“We understand the government’s problems, but there can be other measures, such as a 100% levy on rice till procurement ends, which won’t distort market forces. Exporters are in a bind here over rice that is not even procured by the Food Corp. of India (FCI),” says Chanana.
Varieties such as 1121, Swarna Masoori, Sharbati, IR-1001, are a few of the premium varieties that are not procured by the FCI for public distribution, but these varieties are widely exported.
Basmati is sold at $1,200-1,300 (Rs47,196-51,129) per tonne, while Sharbati sells for $700-800 a tonne.
“The prices of these varieties will crash and finally the farmer will get a lower price from traders as all the rice meant for the export market will now be sold domestically,” claims Garg.
However, Alok Sinha, the chairman of FCI, maintains the government’s new bonus on rice purchase price will ensure better arrivals and procurement this season and not affect farmers adversely. FCI estimates it will purchase 25.5mt of paddy against which it have purchased 3mt so far.
Along with the ban on export, the government also announced an additional bonus of Rs50 per quintal on the Rs645 per quintal for common rice varieties and Rs675 per quintal for Grade A variety. FCI does not procure premium non-basmati or basmati for PDS.
One of the varieties, the 1121, is more interesting as its fate still hangs on the decision of changing the definition of basmati rice.
If a proposal of the agriculture ministry is accepted by the commerce ministry, then 1121 and a few others would be able to carry the premium tag of basmati and therefore, escape the ban.
A few exporters also bring up the question about the efficacy of the ban without proper safeguards on enforcement. The association, for this reason, has suggested a minimum export price for rice (basmati and non-basmati).
“Without safeguards at ports, non-basmati can simply be exported as basmati and, this year, instead of 1mt of basmati and 3mt of non-basmati being exported, we can expect 4mt of basmati export,” said a trader, who did not wish to be identified.
Meanwhile, the government’s reversal on the DEPB export sop has taken rice exporters by surprise. The government had increased the DEPB from 1% to 3% on 17 July and said it would be in effect March. Last week it was cut to 1.5%, with immediate effect.
“I am shocked at this move and we really don’t understand it. With a strengthening rupee, the government has been mulling sops for exporters, but this lops off even more,” said Chanana. He claimed Amira Foods alone will lose Rs4 crore because of this reduction. “We stand to lose Rs5 crore,” added Garg of Shri Lal Mahal.
All rice exporters will lose 1.5% of their export revenue after the reduction in DEPB.
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First Published: Sun, Oct 14 2007. 08 37 PM IST
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