Potential 2-Week Decline to $850 per Tonne: Local Supply Eases for Basmati Rice
Published on: October 23, 2023.
Filed under:
The commerce ministry has announced that the minimum export price (MEP) of basmati rice may be reduced from the current $1,200 per tonne to $850 per tonne. This decision comes after exporter groups raised concerns about facing losses due to the high ceiling. The government is expected to issue a notification regarding this reduction in the next two weeks.
The delay in reducing the MEP was primarily to control domestic prices. However, with the arrival of the new crop of ‘basmati’ rice and the anticipation of a drop in prices, the government is now taking action. Rice inflation has been consistently high, averaging at 12 percent over the past four months. The government is hopeful that the prices will significantly decrease in the coming month as harvests enter the market.
In an effort to increase domestic rice supply and control prices, the government previously mandated that basmati rice contracts valued at $1,200 per tonne or above could be registered for exports until October 15. However, this order has been extended until further notice.
Rice exporters have expressed their concerns about the impact of the MEP on their businesses. Alok Dhanuka, the Executive Director of the All India Rice Exporters Association, stated that exporters are unable to export their rice and have been forced to reduce or stop new procurements. The high MEP has also resulted in neighboring Pakistan gaining a larger share of the global market.
India is a major player in the global rice export market, accounting for approximately 40 percent of the trade. The country exports about 4.5 million tonnes of basmati rice every year out of a total export market of 5.5-6 million tonnes. In the April-July period of the current fiscal year, India exported basmati rice worth $1.7 billion, marking a 13 percent increase compared to the same period last year. In the previous fiscal year, India exported 4.56 million tonnes of basmati rice valued at $4.78 billion.
To combat persistently high inflation, India has implemented various measures to control retail rice prices. These include banning the export of broken rice in September 2022, halting non-basmati white rice exports in July, and imposing a 20 percent duty on parboiled rice until the end of FY24.
India’s export restrictions have had a significant impact on global rice prices, with the commodity reaching a 15-year price ceiling. The Food and Agricultural Organization’s All Rice Price Index increased by 9.8 percent in August 2023, reaching a 15-year nominal high.
Overall, the reduction in the minimum export price of basmati rice is expected to benefit exporters and help stabilize rice prices in the domestic market. With India being the world’s largest rice exporter, any changes in its export policies have significant implications for the global rice trade.
Source: [Moneycontrol](https://www.moneycontrol.com)
