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Harish Damodaran

New Delhi, Aug. 15 Prices of Pusa-1121 — till recently the most sought after variety of aromatic rice — have crashed following a drying up of export orders.

The premium paddy, which was fetching over Rs 40 a kg only 2-3 months back, is now selling at Rs 26-27 a kg. And this, at a time when the new crop is barely two months away from being harvested and brought to the market.

Traders attribute the decline in prices mainly to lacklustre demand from Iran. The Islamic republic, along with Iraq, is said to have bought about 3.5 lakh tonnes (lt) out of the estimated 5 lt of Pusa-1121 shipped out from the country during the current season from October 2007.

Bulk of the rice going to Iran and Iraq is routed through buyers stationed in Dubai, who have their separate channels for despatching the product to the final destination. There is only a small quantity that gets exported directly, mostly to the Bandar Abbas port.

When the current season started, Pusa-1121 was being exported to Iran at $1,250-1,300 a tonne free-on-board. As the season progressed, prices rose to as high as $2,100-2,200 a tonne towards May and the first week of June. This was, in turn, reflected in the paddy price, which climbed from Rs 23-24 a kg to Rs 40 and above.

“That was a period when rice prices in general were rising globally and so there was a lot of panic buying. Parties in Iran who required only 100 tonnes were buying 125 tonnes. Prices flared up as a result,” trade sources said.

But from around end-June, the markets began cooling, which got aggravated by the heavy anti-hoarding measures taken by Iranian authorities. The traders who had over-bought were then left with no option but to liquidate their stocks and go slow on placing fresh orders.

The result: about 40,000 tonnes of Pusa-1121 rice got stranded in Dubai. “The deals were not done against letters of credit. Instead, they were largely very short-term contracts involving cash advance of 20 per cent, with the balance 80 per cent payable once the consignment reached Dubai. But in this case, the buyers refused to pay the 80 per cent at the originally contracted rates,” the sources added.

Initially, the importers were willing to even cough up the $200-per-tonne export duty that was levied by the Indian Government in early May — taking the effective purchase price to almost $2,400 a tonne. But in the new situation, they decided to play tough. It is learnt that Indian exporters have had to renegotiate the old contracts at $1,750-1,850, inclusive of duty.

“Also, there have been no new contracts in the last one-and-a-half months. Everybody wants to liquidate the existing stocks before the new crop comes to the market. If at all, contracts will happen now, it will only be at a tax-paid level of $1,600 or so,” the sources said.

The real losers in the bargain may be the farmers, who have enthusiastically planted Pusa-1121 expecting a repeat of last year’s dream realisations. Once the new season starts, paddy prices could plunge to below Rs 20 a kg. Also, exporters may load on the $200-per-tonne export tax (which works out to Rs 8 per kg of rice or Rs 5 per kg of paddy) to the farmers, who would, then, effectively realise only Rs 15 a kg.

More Stories on : Exports & Imports | Rice

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