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Uncertainty over rice contracted for exports

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Ban ill-advised, say exporters; 3 lakh tonnes lying in ports

M.R. Subramani

Chennai, Oct. 10

Uncertainty hangs over the 10 lakh tonnes of rice contracted for exports after the Cabinet on Tuesday decided to ban exports of non–basmati rice. At least three lakh tonnes of rice meant for exports are lying in the ports, according to trade sources.

“We have sewed up deals to export 10 lakh tonnes of rice. The shipments will be done in the course of next three months. We have not opened letters of credits (LCs) as they will happen only close to the shipment,” said an official of an exporting firm, who did not wish to be identified.

“Besides, at least three lakh tonnes of rice are lying in various ports. Now, we don’t know what will happen to them. If we are not allowed to export, then we will have to take them back to the domestic tariff area, in which case we will have to pay additional taxes,” he said.

‘Loss of face’

But more than losing the contracts, exporters fear the repercussions of the ban. “It is a loss of face for us in the global market. We have been doing pretty well in the last 4-5 years and have earned a name for quality shipments. We have even gained a foothold in new markets,” an official of another exporting firmsaid.

India has emerged among the top three rice exporters in the last five years and tops in shipments of parboiled rice. It has been able to make headway particularly in West Asia and North Africa.

“We are exporting close to 40 lakh tonnes annually fetching over Rs 4,000 crore. The Centre has opted to take an ill-advised move,” industry sources said.

Pointing out at the Union Food and Agriculture Minister, Mr Sharad Pawar’s statement last week that non-basmati exports would not be banned, the sources said by doing exactly the opposite, the Centre had made it hard for importing nations to trade with India.

“More than that, the unit value realisation of rice exports has increased by over 50 per cent in terms of dollars. From around $180 a tonne, they fetch nearly $300 now,” the sources said.

Breach of contract

Internationally, no rice is now available below $300 a tonne. While the Centre’s move is now seen favouring Thailand by a section of the trade, another sees Pakistan also making headway, particularly in white rice exports.

“Apart from all these, we are going to face litigation for breach of contract. It will be loss of earnings and face for us,” an exporter said.

Also, traders feel the Centre has not done the right thing by banning exports. “See, exporters don’t buy paddy. They buy only rice. The Centre’s procurement of paddy for the public distribution system and other welfare measures it implements has been tardy only because people were waiting for the bonus announcement,” traders said.

“It was in the public domain that bonus for paddy was coming and it was before the Cabinet. So, mills in particular held back. Instead of reading the real situation, the Centre has panicked,” industry sources said.

On Monday, the Centre said paddy procurement had declined this year by over five lakh tonnes to 17.50 lakh tonnes.

“There is a basic misconception about banning exports and paddy procurement. The quality of rice exported is different from what is distributed for various Government programmes. Then, at least 35 per cent of rice meant for public distribution gets leaked into the open market. This should have been plugged instead of the ban,” the sources said.

“The Centre could have waited for some more time or even post-dated its move. This has left everyone helpless. Stocks with it are adequate and above buffer norms,” they said.

As on October 1, rice stocks in the Central pool was 54.8 lakh tonnes, well above the buffer stock norm of 52 lakh tonnes.

“The Centre has done to rice what it did to sugar. It banned sugar exports and by the time it was lifted, the whole industry was in trouble,” the sources said.

“On the one hand, the minimum support price (MSP) has been hiked. On the other, exports have been banned. This will lead to fall in domestic prices as mills and others, including exporting firms , have stocks that will have to diverted to the local markets. It will mean prices will fall below MSP and finally, the Government will end up paying for it,” the industry sources said.

“Also, this could lead to huge rise in buffer stocks. That could lead to situation of selling rice at discount again the global market wherein quality could suffer. And again, we will have start all over again to build our market,” they said.

(This article was published in the Business Line print edition dated October 11, 2007)
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