Government reduces basmati rice export floor price to $950 per tonne
Published on: October 25, 2023.
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The Union government of India has made the decision to lower the minimum export price (MEP) for basmati rice, following complaints from traders that overseas shipments had become unprofitable. Initially, the government had set the MEP at $1200 per tonne in order to reduce domestic prices. However, in a meeting on Monday, the government approved a reduction to $950 per tonne. This decision is still pending notification.
The extension of export restrictions on basmati rice on 14 October caused concern among farmers and exporters, who argued that the high floor price was making Indian shipments uncompetitive compared to those from Pakistan, which also produces basmati rice. In response, a leading body of exporters called for a halt in overseas shipments.
To address these concerns, Food Minister Piyush Goyal engaged in discussions with traders and assured them that the government would review the MEP. Food Secretary Sanjeev Chopra confirmed on 18 October that the government was actively reviewing the MEP, stating that a decision would be made at the appropriate time.
India is a major exporter of basmati rice, with an annual shipment of over 4 million tonnes, primarily to West Asia. Countries such as Saudi Arabia, the United Arab Emirates, Iraq, Iran, and the US are among the largest importers of Indian basmati rice. MEP serves as a price threshold that exporters must adhere to when selling to global buyers. It is implemented to limit exports. India, as the world’s top rice exporter, has also banned overseas sales of white non-basmati rice and wheat to control local prices.
In response to representations from rice exporters’ associations, an interministerial committee was established last month to review the floor price. The committee was tasked with monitoring prices and assessing the negative impact of the high MEP. In the 2022-2023 period, India exported basmati rice worth over $4.79 billion, primarily to West Asia and the US. From April to August, the country exported nearly 2 million tonnes of basmati rice, resulting in approximately ₹2,200 crore in value, a 12% increase.
Traders have noted a significant slowdown in shipments since the MEP was implemented in August. This development comes as exciting news in the rice export industry, as it addresses concerns raised by traders and farmers while promoting healthier competition and market viability.
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