India considers selling 1 million tonnes of rice to support essential ally Indonesia
Published on: October 15, 2023.
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India Contemplates Rice Export Deal with Indonesia
India is considering sealing a deal through a memorandum of understanding (MoU) to export up to 1 million tonnes of white rice annually to key diplomatic partner, Indonesia, as intimated by a pair of government representatives.
Rice Trade Amidst El Nino-related Challenges
In the face of India’s prohibition on non-basmati white rice exports on July 20, Indonesia is making plans to protect its food security amidst disruptions fueled by the El Nino weather pattern and supply issues from its main provider, Vietnam.
Despite self-sufficiency in rice production, Indonesia leans on MoUs for white broken rice supply during periods of uncertainty in domestic demand. Presently, Indonesia maintains MoUs for rice supply with several countries like Myanmar, Pakistan, Thailand, Cambodia, and Vietnam.
India as Alternative Rice Supplier
A government official explained, “Indonesia is presently experiencing difficulties because Vietnam, the existing main provider to the country, is looking to reduce its rice exports significantly amid a drought projected due to El Nino effects. Hence, Indonesia is eyeing India as an alternate provider, proposing an MoU to secure up to 1 million tonnes of white rice annually.”
In spite of its current ban on white rice exports, India can grant permission for export to satisfy the food security needs of other countries at their governments’ behest. India has done this previously, allowing limited rice export to countries like Bhutan, Mauritius, UAE, and Singapore, as well as to the UN’s World Food Programme.
No Binding Commitment in MoU
The governmental spokesperson further clarified that the proposed MoU will not impose any compulsory commitment on India to provide rice if domestic production hits a low point. Product availability in both countries governs each purchase. Moreover, the MoU stipulates that it doesn’t create any obligation under international law for either party, including a provision for any party to terminate the MoU by offering a 6-month notice.
Trade Impact
According to the commerce ministry, rice exports from India to Indonesia in the 2022-23 fiscal year (April-March) amounted to $1.05 million and additionally $6.51 million till this point in the present financial year. India contributed to 9.61% of Indonesia’s white rice import in 2020, increased to 17.51% in 2021, but decreased to 7.06% in 2022.
As a result, India’s rice exports to Indonesia might see an uptrend with the MoU when export conditions are conducive, diversifying trade offerings and reducing the wide trade deficit.
Market Strategy
This MoU could help India secure a foothold in the Indonesian market, positioning it as an alternate supplier in place of Vietnam, Thailand and Pakistan, the latter being some of the leading exporters post India. It might also enhance India’s reliability among other Asean (Association of Southeast Asian Nations) rice buyers such as the Philippines and Malaysia.
Indonesia is India’s principal trading partner in the Asean region, with trade valued at $38.84 billion accounting for slightly above 29% in 2022-23 of India’s commerce with Asean countries. The trade deficit last fiscal year was $18.8 billion, majorly due to significant palm oil imports from Indonesia. The deliberations about the MoU are still in the initial stages and will be tabled before the relevant authorities before seeking cabinet committee approval.
Queries Pending Response
Queries directed at spokespersons of the Indonesian embassy in New Delhi, the commerce and food & public distribution ministries on Friday remained unanswered as at press time.
