The Hindu Business Line : Basmati prices rule lower, seen dropping more

New Delhi, Oct 7 Farmers who had enthusiastically planted and expanded acreages under basmati rice this year are having to reconcile themselves to lower realisations.

Prices of Pusa Basmati-1 paddy – the harvesting of which just about has commenced – are currently averaging around Rs 1,800 a quintal in most mandis of North India. The corresponding opening rates at this time last year were about Rs 100 higher.

PRICEs DECLINE

There is a similar decline being reported in other aromatic long-grain varieties not technically basmati, such as Sharbati (Rs 1,200 a quintal now versus Rs 1,350 at this point last year) and Sugandha (Rs 1,300 versus Rs 1,500).

What is worse, prices are expected to dip even more in the days to come. One reason for this is the projection of a bumper crop, the harvesting of which will peak from the middle of this month.

INCREASED PRODUCTION

According to a field survey-cum-satellite data-based study done for the Agricultural Products Export Development Authority (APEDA), nearly 9.51 lakh hectares (lh) area has sown under basmati this year, which includes 3.16 lh under traditional cultivars, 5.55 lh under Pusa Basmati-1 and 0.80 lh under ‘Super’.

In addition, farmers have planted a record 6.78 lh under Pusa-1121, a variety that till recently was commanding a premium over basmati despite not being notified as one. That takes the total area under basmati (including Pusa-1121) to well over 16 lh – unprecedented for any year.

PAKISTAN COMPETES

But besides increased production, demand side pressures and competition from Pakistan are also being cited as factors behind lower prices this time round. “Pakistan’s main advantage is its extremely weak currency, currently over Rs 78 to the dollar against our Rs 48. The corresponding exchange rates in February 2007 stood at Rs 60.50 and Rs 44, respectively,” a Delhi-based exporter pointed out.

POLICY HASSLES

On top of this, he added, was “our own flawed policy of having an export tax of Rs 8,000 a tonne over and above a minimum export price (MEP) of $1,200 a tonne on basmati shipments.” As a result, while Pakistani exporters are said to be entering into new sale contracts for below $1,000 a tonne (enabled by a weak local currency), Indian basmati exports cannot technically take place at below $1,367 a tonne (MEP plus export tax of Rs 200 at current exchange rates).

“While a premium of $100-150 a tonne over Pakistan is sustaining, it is impossible to maintain a $350-400 gap. One way, of course, is to export at $1,200 and pay the export tax by loading it on to the farmers through lowering of prices. This would translate into paying around Rs 530 a quintal less in terms of paddy,” the exporter noted.

According to him, unless the export duty is done away with immediately, “we will have no option but to load it on to the farmer, that too in the coming days when most of the paddy would be marketed.” Thus, while the biggest loser will be the Indian farmer, the ultimate gainer would be Pakistan’s basmati industry.

Pakistan is expected to export at least 12 lakh tonnes of basmati rice during 2008-09, thereby overtaking India as the world No. 1 in the segment.

Related Stories:
Basmati rice exporters seek early notification of Pusa 1121
Is ban on non-basmati rice exports being flouted?

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