Kochi: Nearly 800,000 farmers in Punjab, Haryana, Uttarakhand and Uttar Pradesh would be forced to give up growing basmati rice and switch to cotton, following the government’s decision to raise export duty on the long-grain rice, according to producers and exporters of the commodity.
Losing out: Higher prices and export duties will hurt the advantage that India enjoys in the basmati market, say rice exporters
The Union government, in its fight to contain inflation that is at levels not seen for more than three years, has increased the export duty on basmati rice to Rs8,000 per tonne to discourage exports and lowered the minimum export price to $1,000 per tonne.
“The export market price of basmati rice is already at a record high and there is a strong global inflationary trend,” said Priyanka Mittal, a member of the Basmati Rice Farmers and Exporters Development Forum. “The big question is if the market can adopt the imposition of export duty without any fall in demand.”
India produces about 1.5 million tonnes (mt) of basmati rice, a fraction of the country’s total rice output of about 98mt. But farmers favour the crop as it lends itself to higher productivity and environment-friendly cultivation, fetching them more returns, said Vinod Ahuja, president of the forum.
Basmati rice, usually sown in mid-July and harvested in October, is perhaps the only crop that affects the water table the least, said Ahuja. Besides, its cultivation mainly uses green manure and consumes less fertilizers and power, he added. Most farmers who grow the variety follow a two-crop system, with basmati rice followed by wheat. But with the new taxes, some farmers said they might be forced to switch to cotton, a comparatively delicate crop with high risk, but the only alternative crop in a wheat-rice cycle.
Basmati rice fetches about Rs1,700 a quintal, while cotton brings the farmer Rs2,000. However, cultivating cotton has more disadvantages, with higher seed and labour costs and a need for more fertilizers.
The minimum yield for basmati rice is 18 quintals per acre, compared with 8 quintals from cotton. The per-acre gross income for a cotton farmer is about Rs16,000, but the net income is a little more than Rs2,000. A basmati rice farmer, on the other hand, gets Rs30,600 at least from an acre after spending about Rs6,000 for cultivation. Also, according to Ahuja, returns from wheat after a cycle of growing cotton is lower than that after a basmati cycle.
The farmgate price realization for basmati is more than 75%, the highest for any grain, said Vijay Setia, president of the All-India Rice Exporters’ Association. Export of basmati rice has gone up by 12% between 1991-92 and 2006-07, with India claiming 53% of the market share. Pakistan is the only major competitor.
Technological and marketing advances, consistent quality, reliable supply and no export restriction so far have given India the edge, said Setia. But price increases and export duties will take away this advantage, he added.
Saudi Arabia, where basmati rice is a staple food, felt the heat of the price increase and the local government announced a subsidy worth $266 per tonne. This helped check a potential fall in demand, noted Priyanka Mittal of the basmati rice farmers forum. Saudi Arabia accounts for 65% of Indian basmati exports.