The Hindu Business Line : ‘Restrictive trade policies denting rice exporters image’

The recent decision to hike the minimum export price (MEP) of non-basmati rice to $650 per tonne and introduce port restrictions through four major ports appears to be a desperate bid by the Government to do damage control to a perceived shortage in the domestic market and the attendant spurt in the price of such rice.

Rice exporters who have cultivated overseas markets sedulously over the last 15 years and earned a niche for India feel unhappy about such restrictive trade policies being followed by the Government frequently, denting their image as steady and regular suppliers abroad.

Available rice export data from DGCI&S show that the country has exported 3.2 million tonnes of non-basmati rice during the first eight months of the current fiscal, against 2.1 million tonnes in the corresponding period of 2006-07 and 1.7 million tonnes in the similar period of 2005-06. Over and above this, the Government has also allowed 0.6 million tonnes of non-basmati rice below the MEP under the special exemption clause to countries like Mauritius, Comoros and Bangladesh through State-trading agencies like STC, MMTC, PEC, besides NAFED and WBECSC Ltd.

With 3.2 million tonnes already exported till October 2007, plus 0.6 million tonnes each by State-trading entities under special exemption clause and private trade, the total export of non-basmati rice this fiscal from India would be the highest at 4.4 million tonnes, surpassing last year’s 3.7 million tonnes.

May diminish surplus

Sources wonder: when the Agriculture Ministry has announced a record production in rice this year, what is the need for regulating non-basmati exports when most of the committed quantities had been shipped out, leaving a small portion of the exports (around 0.6 million tonnes) to be subject to regulations like enhanced MEP and port restrictions?

What worries the export industry is that the four permitted ports, under the new policy on rice, have shipped 63 to 70 per cent of non-basmati rice from the country in the recent past. Considering the fact that the major chunk of non-basmati rice export is handled through these four ports, the new policy has a very limited role in restricting the flow of rice from the surplus North Indian States. On the contrary, the present policy encourages exporters to lift the surplus quantities available in the northwest (Punjab) and to export them through these ports which are contiguous to Northern India. This would diminish available surplus of rice from this area in the coming months.

Inconsistencies

The sources say that even if the MEP announced at $650 per tonne would discourage non-basmati rice export from this region, given the high volatility in the global rice prices noticeable in recent period the price differential between $550/tonne and $650/tonne would get bridged on the back of the rebound in the global grain markets’ demand.

Commodity specialists contend that out of the 1.2 million tonnes exported from November 2007 to March 2008, the Government has set apart 0.6 million tonnes to State-trading entities under special exemption, when it is fully aware that domestic availability of non-basmati rice is getting shorter and prices are going up. Sources say that such inconsistencies in the objectives of the export policy would not help the stakeholders, and will also bring down Indian exporters as a reliable source of supply in the overseas market.

Sources say that more than 70 per cent of the 4.4-million tonnes of non-basmati rice export is already shipped out by October 2007 without any MEP; while in the balance 1.2 million tonnes — 0.6 million tonnes is to be exported by state-trading entities under special exemptions, while only 0.6 million tonnes of private trade is subject to higher MEP and port restrictions. This in no way achieves the objectives of regulating non-basmati rice export nor does it serve the food security concerns being felt in the wake of short domestic availability of non-basmati rice and the consequent spurt in its prices.

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