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Published on: Aug. 11, 2023, 1:27 p.m.
Rice and fall: Lost objectives
  • The government’s blanket ban is expected to shrink India’s rice exports

By Rakesh Joshi. Executive Editor, Business India

Exports of non-basmati white rice were banned to ensure adequate availability and allay price rises in the domestic market through a notification by the ministry of consumer affairs, food & public distribution on 20 July. This was preceded by the imposition of an export duty of 20 per cent on non-basmati white rice last September. Despite these supply-side interventions by the Union government, prices of rice are unlikely to ease immediately.

The domestic prices of rice continue to rise, as retail prices increased by 11.8 per cent in June, according to data from the ministry of statistics & programme implementation. That’s the highest since 2015. Retail prices have held steady, as the all-India average was recorded at Rs40.96 per kg as of 31 July. This was 2 per cent higher than the rate that prevailed a month ago and 10.6 per cent higher than what was in vogue a year ago.

The twin objectives of having sufficient stocks and bringing down prices appear to have been frittered away due to factors beyond the government’s control. The ban, following other restrictions, sent the Asian market into a panic. There also concern about food inflation, especially across Asia. 

India is responsible for about 40 per cent of the global rice trade. The banned items amount to about 15 per cent. The United Nations Food & Agriculture Organization (FAO) has informed that the rice price index has risen 2.8 per cent in July from a month ago to their highest level in nearly 12 years, as prices in key exporting countries jumped on strong demand and India curbed exports. 

Global impact

Within Asia, the Philippines has been most impacted, while Singapore, Hong Kong and Malaysia, which also depend on imports to meet much of their rice needs, were also hit. (In contrast, Thailand gained because it is a net rice exporter.) Global food economists are now speculating that, if supply in India remains robust, the Modi government could lift or loosen the ban.

Back home, despite the imposition of duty, exports saw a rise from 3.37 million tonnes between September 2021 and March 2022 to 4.21 million tonnes between September 2022 and March 2023. This is because of a sharp increase in international prices due to the geo-political scenario, fears of El Nino and extreme climatic conditions in other rice-producing countries. Besides, there is no change in the export policy of parboiled rice and basmati rice, which form the bulk of rice exports. This will ensure that the farmers continue to get the benefit of remunerative prices in the international market.

Indeed, India’s overall exports of rice have witnessed a spike despite previous government measures amid a decline in Central stocks and a rise in domestic prices. The government clearly views these as red lines from a domestic food security and inflation point of view but clearly there is not much it can do about it.

  • Despite the September curbs, rice inflation rose from about 9 per cent year on year then, to about 12 per cent in June; and daily data suggests a further rise in July

Despite the September curbs, rice inflation rose from about 9 per cent year on year then, to about 12 per cent in June; and daily data suggests a further rise in July, Nomura Holdings Inc informs in a note. Domestic inflation could still be impacted by higher global prices, if they spill over into the unrestricted categories, says Nomura. “We expect continued supply-side interventions,” the note adds.

However, the prohibition on export of non-basmati white rice could lead to a lowering of prices for the consumers in the country. Non-basmati white rice constitutes about 25 per cent of the total rice exported from the country. The government’s blanket ban is expected to reduce India’s rice exports by 4-5 billion tonnes this fiscal – more than a fifth of what was exported last fiscal. That should improve domestic supplies and have a moderating effect on retail prices.

The total production of rice in 2022-23 is estimated to be a record 135.5 million tonnes – higher by 6.07 million tonnes over the previous fiscal, according to the third advance estimate of the ministry of agriculture & farmers’ welfare in May. Currently, stocks of food grain in the Central pool are adequate to meet domestic demand, despite falling to a three-month low in July. The Centre’s stock has touched 24.35 million tonnes, according to data from the Food Corporation of India. 

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