Soaring rice prices, crop shifts could hit govt purchases

Soaring rice prices, crop shifts could hit govt purchases

New Delhi: Even before the procurement season for rice commences, prices of several varieties have spurted by 40-50% this year, leading to fears this could trigger hoarding and consequently feed into a price spiral.

Further, with farmers preferring to plant more basmati this season, there is a strong likelihood of a shortfall in production of other, cheaper varieties of rice, causing an even sharper spurt in this politically-sensitive segment.

In the process, it could also hamper the government’s procurement programme to boost supplies to the public distribution system (PDS).

“Rising prices are not just an Indian phenomena even as global rice stocks have reached a 30-year low. The buffer stock at the beginning of the season, which should be around 30-40%, is currently at 17%," said a market watcher, who did not wish to be identified.

Though the season has just started, farmers and traders predict that prices will rise. “Farmers are already getting 30-40% more as price than last year. Sharbati, a variety of rice, was selling at Rs950 per quintal last year, and this year, it is Rs1,400 per quintal," said Vijay Setia, president, All India Rice Exporters Association. Other varieties such as Sugandha and Triplicate are also showing similar upswings. Some traders believe that increase in acreage under basmati rice and basmati variants, in Haryana and Punjab, have reduced land under non-basmati rice cultivation. According to an independent evaluation using satellite imagery and carried out by a private company, in this year’s kharif season, Haryana has more than 50% of its rice cultivation under basmati rice and its adulterants, and Punjab has 25% under basmati rice.

This is partly because of the big spurt in international prices of basmati as well as the Punjab government encouraging farmers to shift to basmati cultivation under crop diversification programmes.

“Acreage under basmati and its adulterants have gone up by 25% in the last two years," says a trader, who did not wish to be identified.

“You can’t really blame the farmer for doing this. Firstly, basmati requires less water and everyone knows how abysmal the condition of groundwater is in Punjab. Secondly, if basmati gives a much better price to a farmer on lower input cost, who wouldn’t change?" Setia added.

This year’s minimum support price has been announced at Rs645 per quintal for common rice and Rs675 per quintal for grade-A rice. “I think a bonus of Rs100 per quintal should be announced," said Setia.

Food Corporation of India (FCI), however, is not alarmed about the price rise in rice as they are set to start procurement from 1 October. “There won’t be any problem as far as PDS procurement for rice is concerned. This is a temporary phase. We procure rice mainly from Punjab, Haryana, Uttar Pradesh, Orissa, Tamil Nadu, Uttar Pradesh and Chhattisgarh, though around 40% is from Punjab alone," said a senior official at FCI, who did not wish to be named. This year’s target for procurement is 27.6 million tonnes and FCI currently has 6mt in stock.