Government May Lower Floor Price for Basmati Rice Exports to Boost Market Competitiveness


Published on: July 3, 2024.

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The Indian government is considering reducing the minimum export duty (MEP) on basmati rice. This move comes as global prices for certain types of aromatic rice have already dropped below the MEP due to ample supplies and high carry-over stocks. Exporters have expressed concern that a higher MEP could impact domestic procurement of basmati rice paddy for the upcoming season and negatively affect farmers’ income.

Prices for Indian varieties Pusa 6 and Pusa 1509 are currently around $750/tonne-$800/tonne, the same level at which Pakistan sells similar items. Sources have indicated that a committee of ministers will meet soon to discuss the possibility of lifting or reducing the MEP, which was imposed in October 2023. The committee will also consider relaxing export restrictions on non-basmati rice and finding ways to dispose of surplus rice held in the central pool stocks.

During the period of April to May 2024-25, India exported 0.96 million tonnes (MT) of basmati rice, marking a 15% increase compared to the previous year. The value of basmati rice shipments during this period amounted to $1.03 billion, a 13% increase year-on-year. Importing countries have accumulated a large stock of basmati rice from the previous fiscal year, leading to higher carry-forward stocks due to a bumper output in the last kharif season.

Vijay Setia, the managing director of Chaman Lal Setia Exports, a leading exporter of aromatic rice, has urged the government to reduce or eliminate the MEP as new crops are expected to arrive in the coming months. Setia emphasized the importance of ensuring that farmers receive fair prices for their produce.

In October of last year, the government reduced the MEP for basmati rice shipments from $1,200/tonne to $950/tonne in order to curb the illegal shipment of white non-basmati rice, which had been banned in July of that year.

In the fiscal year 2023-24, India exported a record 5.24 million tonnes (MT) of aromatic rice, valued at $5.83 billion. Trade sources have reported that the country produced 8 MT of aromatic rice during the kharif season of 2023, a 20% increase compared to the previous year. Around 1.5 MT of aromatic rice is consumed domestically, and approximately 1.5-2 MT is carried over into the current fiscal year.

With expectations of another bumper harvest in the upcoming kharif season of 2024, thanks to anticipated normal monsoon rains, domestic stocks are projected to rise further, resulting in lower prices.

Basmati rice with a Geographical Indication (GI) tag is grown in various districts across Punjab, Haryana, western Uttar Pradesh, Jammu & Kashmir, and Uttarakhand. This aromatic and long-grain rice is in high demand in the global market. India holds an 80% share of the world’s aromatic rice market, while Pakistan accounts for approximately 20% of basmati rice exports.

Source:[source](https://www.financialexpress.com