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Mint Explainer: How export curbs have impacted rice trade

Following India's rice export curbs, global prices have hit record highs as the country is the world’s largest exporter of the food grain.
Following India's rice export curbs, global prices have hit record highs as the country is the world’s largest exporter of the food grain.

Summary

  • As a direct consequence of the export restraints, global rice prices were up 35% year-on-year as of 29 September

Over the past year, amid persistently high inflation, India has taken several steps to keep retail prices of rice in check. One of the them was export ban. The export curbs, rolled out since September last year, has effectively brought rice trade to a grinding halt for some varieties. Global prices have hit record highs as India is the world’s largest exporter of the food grain. But with new crop arrivals imminent, traders are hopeful that some of these restrictions may be eased. 

Mint explores the contours of these curbs and if a breather is on its way.

Rice varieties affected by curbs

The initial ban in September 2022 targeted broken rice, a major import for China's hog feed. Subsequently, India levied a 20% export duty on all rice types, barring basmati and parboiled. By July this year, the country had halted non-basmati white rice exports, and the following month saw a 20% duty on parboiled rice alongside a minimum export price (MEP) of $1,200 per tonne for basmati varieties.

Impact on trade

According to the United States Department of Agriculture (USDA), these curbs have restricted an estimated 45% of India’s annual rice exports. In the fiscal year 2022-23, the country had exported rice worth 89,532 crore, amounting to over 22 million tonne. Preliminary figures indicate that from 25 August to 20 September, basmati rice exports dropped 30% year-on-year, and parboiled rice sales plummeted a steep 83%. Official data for the period is yet to be released. Meanwhile, as a direct consequence of these export restraints, global rice prices were up 35% year-on-year as of 29 September, according to the International Grains Council.

What are Indian rice exporters expecting?

Mint spoke to several rice traders and exporters and they are hopeful that the 20% export duty on parboiled rice may be revised lower or abolished after 15 October, once the Kharif harvest hits the markets. According to traders of basmati rice, the government has indicated that the MEP will be revised lower to $850 per tonne, very soon. With these decisions pending, tradeers and global buyers have adopted a cautious stance, expecting price to decline once duties and MEP are reduced. For now, some of the parboiled rice have been redirected locally which has led to a drop in prices within India, from 38 per kg (before 25 August) to 31 per kg now. Traders also said that deals may resume after 15 October, even if export restrictions are not eased. For now, any trade deal comes loaded with price risks.

But easing of exports curbs depends on the size of the upcoming harvest. Market arrivals in October and the quantity which the Food Corp. of India is able to directly procure from farmers, at minimum support price or MSP, will provide cues on the size of the crop.

What happens if export curbs are retained for longer?

Some analysts have flagged concerns that following uneven monsoon rains, India's rice production may be hit. Traders said that if export curbs are not eased India may lose market share to neighbouring Pakistan. But the decision is for the government to take after it takes a call on the size of rice harvest. 

Data from the ministry of consumer affairs shows that as on 2 October average retail rice prices within India were 11% higher than last year. With pivotal state and general elections on the horizon, the government will likely tread with caution.

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