Rice export curb fears spark scramble for LCs
NEW DELHI : Large rice companies, traders and exporters are rushing to secure letters of credit (LCs) for future shipments, fearing that rising prices may trigger export curbs on non-basmati varieties, three people aware of the matter said.
Securing LCs will enable these entities to export rice varieties even after the announcement of a ban, as seen earlier in the case of the ban on broken-rice exports in September last year. Concerns of export curbs and the additional LCs may push up India’s overall rice exports in July.
An executive at a rice exporter said their company has opened LCs worth ₹10 crore so far in July, twice as much as in June. “The rumour, whether true or not, has created some business-related fear among non-basmati traders and exporters. As a result, they have started issuing as many LCs as possible. So have we,” the executive added.
Rice prices have risen 20-30% in the past three months, and about 10% over the last 20 days. Ratna rice is being sold at ₹35-36 a kg, Miniket variety at ₹45 per kg, Kolam at ₹53-54 a kg and Sona Masuri at ₹50 a kg. This has sparked worry that government may ban exports of all non-basmati rice varieties ahead of the 2024 general elections.
India, the world’s largest rice exporter with a contribution of about 40% in global trade, shipped 4.5 million tonnes (mt) of non-basmati rice in April-June, against 4.3 mt despite a 20% export duty in place since September 2022. While export curbs move may lower domestic prices, it may also impact about 80% of India’s rice exports, and drive up global prices.
India’s 25% broken rice is priced at $455 per tonne, while 5% broken rice is at $470 per tonne. Prices of same varieties offered by other leading exporters such as Thailand and Vietnam are $40-50 per tonne higher than India, said Vinod Kaul, executive director of All India Rice Exporters Association. Some of India’s leading rice companies are Adani Wilmar, Daawat, KRBL Ltd, and LT Foods that are issuing more LCs.
“Opening more LCs will allow us to export rice stocks lying with us even if the government imposes a ban. It is not like we must ship the quantity immediately against which LCs are issued. We can do it by next month,” the executive cited earlier said.
However, industry experts do not expect a blanket ban on non-basmati rice. “There is already a 20% duty on non-basmati rice, except parboiled rice, and a complete ban on broken rice exports. This means a restriction on exports,” Suraj Agarwal, CEO of Rice Villa brand, said.
“Non-basmati varieties like Sugandha and Sarbati, which are blended in basmati rice and exported, are produced in Punjab and Haryana. India being a major exporter in global market of basmati rice, exclusion of these varieties from its basmati rice export basket will hit India… If at all, government may put some restrictions e.g., imposing duty, restricting exports of varieties having a certain length like putting a ban on IR64, Ratna or similar varieties having length of 6.2 mm,” he added.
Queries sent to Directorate General of Foreign Trade and food, agriculture and commerce ministries remained unanswered till press time.
The rise in rice price is attributed to lower stocks from last rabi season, amid less crop from West Bengal, UP, Bihar and Odisha and parts of Andhra Pradesh, and government increasing paddy minimum support price (MSP) 7% year-on-year.
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