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Home / Industry / Agriculture /  The math behind the rice export ban

Last week, the Indian government imposed several restrictions on rice exports. It banned the export of 100% broken rice, which is predominantly used as cattle feed, and imposed a 20% export duty on several other grades of rice. This was seemingly in response to both a rise in domestic prices and decreased sowing in several key rice-producing states because of a sluggish monsoon.

India is the second largest producer and largest exporter of rice in the world, accounting for nearly 56% of the global exports in 2021, shows data from the United Nations' Comtrade database. Exports have risen quite sharply over the past two years, backed by a bountiful monsoon and the consequent bumper crop. However, this year is different.

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Kharif sowing of paddy, which generally begins in June and July with the onset of the monsoon, has been slow because of erratic rain in leading rice-producing states such as West Bengal, Uttar Pradesh, and Andhra Pradesh. As on 9 September, the aggregate sowing across the country stood at 39.4 million hectares, nearly 5% less than the same time last year. The shortfall exceeds 9% in West Bengal and is nearly 4% in Uttar Pradesh. This has prompted the government to warn of a possible fall in rice production following two years of record output. At the same time, it tried to allay concerns about rice stocks, which it says will remain well in surplus of requirement.

Let’s look at the maths of this.

Monsoon bullet

The dismal monsoon is set to hit rice production this season by up to 6-7 million tonnes (MT) from last year’s peak of nearly 119 MT, show government estimates. That would be far short of the earlier estimate of 130 MT.

Production had reached record highs in the last two years amid good monsoon and surplus farm labour available during the pandemic. Procurement had also increased significantly. The increased production and the unease over the now-withdrawn agriculture bills prompted the government to procure more rice from farmers for the central pool. Demand also rose as disbursal through the public distribution system (PDS) was part of the poverty alleviation steps put in place amid the pandemic.

This year, while production is set to fall, procurement is expected to remain high because of the extension of the free food scheme, leaving less for exports. That seems to be a big rationale for last week’s move.

Surplus stocks

The Centre procures foodgrain with two objectives: to provide a price guarantee to farmers in the form of the minimum support price, and to distribute subsidized foodgrain to over 920 million PDS beneficiaries. As rice is a staple for many Indians, substantial stocks are necessary to ensure food security. The Food Corporation of India (FCI) is tasked with maintaining a central pool of foodgrain to meet this operational requirement and exigencies at any time.

Stocking norms for rice vary through the year to account for the rice sowing and procurement cycles. The norms require 7.61 MT to be stocked as of 31 March, 13.58 MT as of 30 June, 13.54 MT as of 30 September, and 10.25 MT as of 31 December. The stock as of July-end was 28 MT, more than twice the prescribed amount. This also suggests that the export curbs are largely pre-emptive, to prepare for a sharp decline in production.

Exports impact

India is the world’s largest exporter of rice and exported more than the next four countries put together in 2021. Exports were 21 MT in 2021, more than double the quantity in 2019. Exports helped the FCI manage the burgeoning rice stocks over the past two years.

However, that might change this year because of lower production. The export duties will also increase the effective price of Indian rice in the global market and hence make it less competitive, ceding market share to other leading exporters such as Vietnam, Thailand, and Pakistan. This is also set to increase global rice prices, which had so far remained stable because of cheap Indian exports.

Despite lower sowing this season, India remains more than equipped to deal with the domestic demand for rice. The restrictions on exports, however, will have a global impact.

Arjun Srinivas is an independent journalist.

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