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Our Bureau

To be offset by higher global prices, rupee depreciation

New Delhi , Aug. 25

The additional increase of Rs 40 per quintal in the minimum support price (MSP) of paddy for the ensuing 2006-07 kharif marketing season (October-September) will not dampen prospects of rice exports from the country.

According to the General Secretary of the All India Rice Exporters Association (AIREA), Mr Karan Chanana, the effect of higher MSP would be offset by better international price realisations and the depreciation of the rupee.

Good timing

In the last couple of months, Thai long-grain rice prices have gone up from $295 to $315 per tonne free-on-board (f.o.b).

"The timing of the announcement by the Union Agriculture Minister, Mr Sharad Pawar, is good, as global prices have risen in recent months. Farmers should get remunerative prices so that they are encouraged to grow more of the crop," Mr Chanana told Business Line.

With the latest increase, the MSP for common paddy comes to Rs 620 per quintal (against Rs 570 per cent in 2005-06) and Rs 650 per quintal (Rs 600) for `Grade A' varieties.

Currently, raw rice with 25 per cent brokens is being shipped from Kakinada at $220-222 per tonne free-on-board (f.o.b), with par-boiled sortexed rice (5 per cent brokens) going at $250-252 per tonne. This rice is mainly the `1001' (common) and `IR-64' (superfine) varieties from Andhra Pradesh and Orissa.

Competitive market

On the other hand, the PR-106 varieties from Punjab and Haryana are being shipped from Kandla and other western ports at higher rates of $227-230 per tonne (raw) and $285-290 per tonne (par-boiled). One reason for this price differential, traders said, is that PR-106 is a superfine variety considered almost on par with American long-grain rice and hence is fetching better realisation. By comparison, Thai long-grain rice is now selling at $315 per tonne f.o.b and that makes even PR-106 exports fairly competitive.

But, there are other reasons as well. In Punjab and Haryana, the paddy is being sourced at the MSP, which is not so in other States. "Millers bought PR-106 in Punjab and Haryana at Rs 610 per quintal, whereas they could source IR-64 from Andhra at Rs 480-500 per quintal. Also, the mandi taxes in Punjab and Haryana are higher compared to that in Chhattisgarh or Andhra. Further, there is just one paddy crop in the North, unlike two or even three in the South. As a result, the millers do not have to buy all the crop at one go and can manage with just 15-20 days stock," the traders added.

About three-fourths of the rice shipments are estimated to be taking place from Kakinada, with Kandla accounting for 15 per cent. The remaining 10 per cent is mainly going in container cargos from Mumbai, after being transported by road from Chhattisgarh and interior areas.

There are even reports of rice being allocated for the Employment Guarantee Scheme getting diverted for export purposes. One trader reckoned that about 30 per cent of shipments from Kakinada consisted of diverted food-for-work rice, though nobody was willing to come on record on this aspect.

More Stories on : Rice | Exports & Imports

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