Basmati MEP may be down to $850 a tonne in 2 weeks as local supply eases
The government is likely to reduce the minimum export price (MEP) of basmati rice to $850 per tonne from the current $1,200 per tonne imposed in August, as per sources. A notification for the same is likely to be issued in the next two weeks, one of them said.
The development comes a week after the government in a statement said that the Centre is reviewing the $1,200-per-tonne minimum export price for rice after exporter groups said they were facing losses due to the high ceiling and halted procurement of the said variety of rice.
The delay in reducing this MEP, as per sources, was only to control domestic prices. “An order is likely to be issued in a week’s time as the new crop of ‘basmati’ has started to arrive, with prices of this key staple now expected to drop,” a source told Moneycontrol.
Rice inflation has remained persistently high, averaging at 12 percent for the past 4 months. With harvests beginning to come into the market, the government is expecting a sharp drop in prices in the coming one month.
The Centre had on August 25, in another attempt to increase domestic rice supply and control prices, mandated that basmati rice contracts only with a value of $1,200 per tonne or above could be registered for exports till October 15. However, the order was extended by the government till ‘further notice’.
The commerce ministry, while notifying the minimum price, had stated that it has received credible field reports regarding misclassification and illegal export of non-basmati white rice whose shipment was banned from July 20, 2023.
Since then, the government has been consulting with exporters who had objected to it, citing losses.
What rice exporters say
As per Alok Dhanuka, Executive Director of the All India Rice Exporters Association, rice exporters have been severely impacted by this MEP in place. “Exporters are unable to export their rice. Our storage houses are full of previous stocks that we are unable to offload and thus have been forced to reduce or stop new procurements. We were unable to secure orders at global food fairs in Istanbul and Iraq due to the relatively high MEP of $1,200 per quintal where competitive country Pakistan took our share of the orders,” he said.
Of the total basmati rice export market of 5.5-6 million tonnes (MT), India holds about 75-80 percent, exporting about 4.5 MT every year.
“With this MEP in place, we have already given our neighboring Pakistan a bigger share in the global market, thereby reducing ours,” he added.
India has exported basmati rice worth $1.7 billion in the April-July period of the current fiscal, an increase of 13 percent compared to the same period last year. In 2022-23, the country exported 4.56 MT of basmati rice valued at $4.78 billion.
According to the All India Rice Exporters Association, the average export price of basmati rice in the last five years has been $975/tonne.
Over the past year, amid persistently high inflation, India has taken several steps to keep retail prices of rice in check. After banning export of broken rice in September 2022 and halting non-basmati white rice exports in July, New Delhi imposed a 20 percent duty on parboiled rice on August 25, extending it till the end of FY24.
World’s largest exporter
India is the world’s biggest rice exporter, accounting for nearly 40 percent of the global rice trade in 2022, exporting 22 million tonnes of the commodity to 140 countries. Of this, its exports of basmati rice stood at 4.5 million tonnes.
According to the United States Department of Agriculture (USDA), India’s curbs have restricted an estimated 45 percent of its annual rice exports. A direct consequence of these export restraints has been a steep rise in global rice prices, with the commodity breaking the 15-year price ceiling.
The Food and Agricultural Organization’s All Rice Price Index increased by 9.8 percent in August 2023 to reach 142.4 points. At that level, the index stood 31.2 percent above its year-ago value and at a 15-year nominal high.
