Bangladesh has cancelled its orders to import two lakh tonnes of parboiled rice from two Indian cooperative agencies through government-to-government (G2G) deals after having kept them in “abeyance” for a few weeks.

Trade sources said Bangladesh, which began dragging its feet after getting a couple of offers offering the rice at lower prices, has returned the “bid bonds” submitted by the two cooperative agencies during negotiations.

The return of the “bid bonds” is a confirmation of Dhaka cancelling its plans to import the rice as part of its efforts to buy five lakh tonnes for its public distribution system.

According to media reports in Bangladesh, the Sheikh Hasina Wajed government decided to “suspend the process of buying over-priced rice” from the two agencies — NCCF (National Cooperative Consumers Federation of India Ltd) and Kendriya Bhandar — last weekend.

Impact on India

The impact of the deal is being felt in the Indian domestic market with prices of parboiled rice dropping at least 10 per cent after having increased 30 per cent in January to ₹29,000 a tonne. Prices had surged on expectations of the G2G rice deals with Bangladesh going through.

“Even as we were loading parboiled consignments for African destinations, millers called us offering more rice at lower prices,” said VR Vidya Sagar, Director, Bulk Logix.

Dhaka’s plans to enter into G2G deals to import parboiled rice ran into rough weather after it face criticism of paying a higher price than what some private Indian exporters had quoted in a global tender to import 50,000 tonnes of parboiled rice.

The Wajed government was also facing problems concerning foreign exchange, which added further pressure on going ahead with the deal.

Global import tenders

In December, NCCF and Kendriya Bhandar offered to supply the two lakh tonnes under G2G deals at $433.60 and $433.50 a tonne, respectively.

Accepting the offer, Bangladesh’s Food Ministry issued letters of intent for the purchases of one lakh tonnes each from the two cooperatives before putting them on hold its decision.

At that time, the offers made by the two cooperatives were $35/tonne higher than what private traders offered in two global import tenders.

In a tender opened on December 21, India’s Bagadiya Brothers was the lowest bidder offering the foodgrain at $393.90/tonne. In the next tender opened on December 27, Singapore’s AgroCorp International offered the most competitive rate of $397.03.

Playing hide & seek

Official sources said they had charged more for the supplies since Bangladesh asked for the new crop besides wanting the consignments to be delivered in two months. Still, a couple of offers were made from the Indian side lowering the price by a few dollars.

“Had it given more time and opted for an older crop, it could have got the rice at a cheaper rate,” an official said on condition of anonymity.

Trade sources said some of the Indian exporters who took part in Bangladesh’s global import tenders had quoted higher prices when the cooperative agencies approached them for the G2G deals.

“Practically, they played hide and seek with us by cutting prices for the Bangladesh tender and raising it when the agencies sought rice for the G2G deals,” said a trader, who did not wish to be identified.

Dhaka, the loser?

After receiving the LOI, the Indian cooperatives were to furnish bank guarantees. But they got delayed by six days and Bangladesh utilised the opportunity to drag its feet before finally calling them off.

A trader said: “If it wanted, Bangladesh could have accepted the guarantee.” This was because Bangladesh Food Ministry and its Cabinet Committee had cleared the G2G deals.

Traders said Bangladesh would be the loser in deciding to not sign the deals as rice prices have increased by at least 10 per cent since the start of the year.

According to Thai Rice Exporters Association data, Thailand, India’s main competitor in the global market for parboiled rice, is offering the cereal at $517/tonne and Pakistan, which is facing short supplies, is offering it at $496-500.

India’s parboiled rice is quoted at $395-399.

“India’s offer is lower by at least $100 a tonne. Where can Bangladesh get rice at such a price? Even if it were to pay higher than the bids made in its global tender, it will still be over $60 a tonne lower than other origins,” said a trader.

Low output, stocks

According to the Food and Agriculture Organisation, rice prices zoomed to their highest since November 2011 in January, though they have declined a tad recently.

In India, the top global exporter, rice prices have increased with the Ministry of Agriculture estimating the Kharif crop this crop year to June lower at 104.99 million tonnes against 111.76 mt last year.

The procurement of rice by the Food Corporation of India has been tardy. Rice stocks in the central pool have dropped by 43 per cent compared with the year-ago period to an 8-year-low of 12.54 mt.

However, unmilled paddy stocks are higher than last year at 47.62 mt (31.91 mt rice).