“Basmati rice export price reconsideration remains underway: Central authorities”
Published on: October 15, 2023.
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Government Considers Review of Current Basmati Rice Export Minimum Price
The authorities are actively contemplating the review of the current Minimum Export Price (MEP) of $1,200 per tonne on basmati rice exports set in August, despite its further extension over the weekend. Initially, the MEP was due for reconsideration by October 15.
Outrage sparked among some rice exporters when the MEP on basmati rice was extended, prompting them to halt purchases of new basmati rice from farmers. The ripple effect was a dip in open market prices, with a reduction of at least Rs 300–400 per quintal in the past couple of weeks.
Several exporters advocate for a lowering of the MEP to the range of $900–1,000 per tonne to stimulate overseas sales. However, a group of exporters and officials defend the high MEP insisting that the current free-on-board (FOB) export price of Indian basmati rice, based on a procurement cost of about Rs 3,835 per quintal, is approximately $1,170 per tonne in Mundra Port and Jawaharlal Nehru Port Trust (JNPT). This makes the MEP merely $30 per tonne more than the FOB price, a nominal surge for international customers.
A trader stated, “This is a minimal premium that international buyers can pay for Indian basmati rice, which is already a niche product”. With the procurement price of Rs 3,835 per quintal, the overall final landed cost of Indian basmati rice is around Rs 9,692 per quintal in Mundra Port and Rs 9,688 in JNPT. These ports are the two largest destinations for Indian basmati imports worldwide.
Exporters who support a drop in the basmati MEP argue that the FOB price is only near the MEP for older varieties of basmati rice. The market prices are likely to take a hit as soon as the new Pusa Basmati 1121 variety makes a market entry, negatively impacting growers. Reports indicate that about 30 per cent of the total basmati crop has entered the market thus far, with the remaining 70 per cent anticipated in the upcoming weeks.
Addressing the reports, an official statement issued on Sunday mentioned that it’s typical for prices to drop when the new crop enters the market. A second argument against a $1,200 per tonne MEP for Indian basmati suggests that it may drive the market towards Pakistan rice, India’s closest competitor in the global markets.
Supporters of the MEP argue that the shift towards Pakistani basmati will not happen rapidly, as Indian basmati rice historically had a premium of 15 per cent over Pakistani rice variants. Pakistan had imposed an MEP of $1,103 per tonne on white broken rice and golden sella basmati rice sometime back, compared to India’s MEP of $1,200 per tonne.
Data gathered from 2017–18 to 2022–23 shows Pakistani basmati rice commanded a higher price over Indian basmati rice for three years, while the reverse occurred in two years. The opponents of lowering the MEP caution that if Indian basmati rice were priced too low in comparison to Pakistani varieties, this advantage may be lost permanently.
“In the present circumstances, retaining the MEP of basmati is critical for food security. However, it could also be seen as a cautious approach to safeguard India’s unique geographical indication branding in current free trade agreements,” S Chandrasekaran, a prominent trade policy analyst, and author of the book Basmati Rice: The Natural History Geographical Indication explained.
In another move, the Centre has extended the 20 per cent duty on non-basmati parboiled rice imports until March 31, 2024, over the weekend. The Indian Rice Exporters Federation (IREF) has requested the government to replace the existing 20 per cent duty with a flat export duty of $80 per tonne on parboiled rice to aid smoother trade.
Furthermore, the IREF has urged the government to reexamine the ban on white rice exports implemented in July 2023, proposing to trim the basmati rice MEP down to $850 per tonne to minimize possible drawbacks on export volumes and farmers.
