Basmati prices have shot up by about 30-35 per cent in the past 20 days. This steep increase, despite a bumper harvest in 2011-12 and not during the peak export season, has left exporters in a tizzy. Some have even stopped booking new contracts and exports.
Cartelisation
Sources said the price hike has nothing to do with market fundamentals and trading volumes are razor thin.
A trade cartel seems to have pushed up the price to justify valuation of their assets to their financiers during the year-end, they claimed.
Such a hike in prices would enable the trade to over-valuate assets including stocks.
The aromatic paddy prices, that ranged between Rs 14 and Rs 17 a kg during the harvest season in November, are currently quoted at Rs 22-27 a kg.
Similarly, the price of milled rice has shot up from around Rs 34-35 a kg to around Rs 50 a kg.
Domestic prices
Interestingly, domestic retail prices of basmati have not seen any change so far.
“It's all driven by sentiments,” said Mr Vijay Setia, President of the All-India Rice Exporters Association commenting on spurt in prices.
“The farmer is not going to gain from this increase and it will benefit only the stockists and exporters,” Mr Setia said reiterating his demand that export prices should be linked to the minimum support prices.
A majority of the farmers sell their produce immediately after harvest that stretches from November till mid-January.
There are small arrivals in some mandis that may benefit some farmers; Mr Setia said adding that people who are not fully covered are stocking up.
No new contracts
“The price behaviour is erratic and there is a shortage being created. It's too high a price and there's something wrong,” said Mr Anil Mittal, CMD of KRBL, the country's largest exporter. KRBL has stopped booking new contracts and is honouring only long-term commitments, he said.
Hike on cards?
Some players are contemplating price hikes in the domestic market.
“There will be an impact of this increase and we will have to consider a price hike,” said Dr Ayushman Gupta, Business Director, Best Foods. “Buyers will have to move in line with the calibrated market,” Dr Gupta added.