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Harish Damodaran

The benefits to the Indian industry are obvious considering that out of its total basmati exports of 1.6-1.7 lakh tonnes (valued at about Rs 500 crore), more than 80 per cent comes from traditional varieties.

New Delhi , Dec. 5

IN what is expected to provide a major boost to the country's basmati export industry, the European Commission (EC) has officially approved the move to restrict the existing 250 euros per tonne duty concession on basmati rice to only traditional or `pure line' varieties with effect from January 1, 2004.

The Cereals Experts Committee (CEC) — representing 15 member-states of the European Union (EU) — on Thursday, passed, on a non avis (no opinion) basis, the European Union Agricultural Commissioner, Mr Franz Fischler's draft amendment to the European Commission Regulation (EC) No. 1503/96 of July 29, 1996, pertaining to import of basmati rice from India and Pakistan.

Currently, Article 4bis of the regulation provides for a uniform duty abatement of 250 euros per tonne on brown (unpolished) basmati rice, irrespective of whether it is a traditional `pure line' or a crossed hybrid variety containing only one true-line parent. But following the passage of Mr Fischler's draft amendment, the duty derogation will henceforth be limited to only five traditional Indian basmati varieties (Taraori, Basmati 370, Dehraduni, Ranbir and Basmati 217) and two indigenous Pakistani lines (Kernel and Basmati 370).

The benefits to the Indian industry would be obvious considering that out of its total basmati exports of 1.6-1.7 lakh tonnes (valued at about Rs 500 crore), more than 80 per cent comes from traditional varieties and only the rest from hybrids such as Pusa Basmati-1. On the other hand, Pakistan's entire exports of 80,000 - 90,000 tonnes comprises hybrid basmati varieties like Super Basmati and Basmati 385, as it does not any longer commercially cultivate traditional lines.

The CEC's clearance is said to have come in spite of stiff opposition from the UK and Germany. The rice trade in London had, in particular, objected to Pakistan's Super being denied the 250 euros per tonne duty concession. But what tilted the balance against Pakistan was the neutral stance adopted by other EC members, including France, Italy, Spain and Greece.

"For Pakistan, it means losing an entire market of 90,000 tonnes. This gap can be filled by us since we grow Taraori and other traditional basmati cultivars," said Mr Gurnam Arora, Joint Managing Director, Satnam Overseas Ltd, which exports about 8,000 tonnes of traditional basmati to the EU. The company, through its overseas joint venture, Indo European Foods Ltd, is in the process of setting up a 15,000 tonnes per annum rice mill near London, to polish brown basmati imported from India and market it under its Kohinoor brand.

The biggest beneficiary of the EC amendment would be United Riceland Pvt Ltd, which is the country's largest traditional basmati exporter to the EU, at about 70,000 tonnes. United Riceland and Picric Ltd (which exports 25,000-30,000 tonnes) already have established mills in the EU for processing brown basmati and marketing white rice under their own Tilda and Veetee brands respectively. The other major exporters include Sunstar Exports (15,000-20,000 tonnes), Bush Foods (8,000-10,000 tonnes), Amira Foods and DD International Pvt Ltd (5,000 tonnes each). These companies are largely merchant exporters who sell for private labels.

According to Mr R.S. Seshadri, Director, United Riceland, the loss to Pakistani basmati exporters due to withdrawal of the 250 euro per tonne duty concession to Super would be massive. Currently, the landed price of Super comes to about 430 euros per tonne. Brown rice imported into the EU normally attracts the maximum bound rate duty of 264. While earlier, the effective duty (after abatement) would have been only 14 euros per tonne, in the new regime, Super would attract the full duty, pushing up the final price to almost 700 euros per tonne.

As against this, the landed price of traditional basmati (c.i.f Europe) is now about 580 euros, which translates into a final duty-paid price of just 594 euros per tonne.

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