The Indian government on Thursday caught the global rice market by surprise banning exports of (non-basmati) white rice with immediate effect as part of its efforts to control rising foodgrain prices in a crucial year ahead of the 2024 Parliament elections. 

The move, a surprise from the world largest exporter of the cereal, is seen as a measure to overcome any supply shortage in view of rains damaging paddy crops in Punjab and Haryana, besides deficient rains affecting sowing of paddy in Karnataka, West Bengal, Chhattisgarh, Tamil Nadu, and Andhra Pradesh.

On Thursday evening, the Directorate-General of Foreign Trade (DGFT) issued a notification non-basmati white (raw) rice (semi-milled or wholly milled rice, whether or not polished or glazed has been shifted to the “prohibited” list - a ban. It had an immediate impact in the global market when the Chicago Board of Trade rice futures gained over 1 per cent for September and November contracts in early trade. Prices increased to $15.9 for September and $15.98 for November per cwt (hundredweight or 45.35 kg). January contracts opened at a high $16. 

Trade analyst S Chandrasekaran said the ban could also have been because white rice exports increased 23 per cent last fiscal (see table) despite the Centre curbing shipments since September 8, 2022.

The government banned exports of fully broken rice and imposed 20 per cent export duty on white rice shipments. The 23 per cent rise is besides nearly three lakh tonnes(lt) of white rice being shipped out at prices less than $300 a tonne or as parboiled rice, trade sources, who did not wish to identify, said. 

40 per cent dip

The rice trade expressed surprise over the move and expected things to improve quickly. The ban could reduce rice exports from India by at least 40 per cent of the over 17 million tonnes of non-basmati rice shipments in the last two fiscal years.  “(It is) painful. Will request the Government to reconsider (the decision) as soon as the situation improves,” said BV Krishna Rao, President, The Rice Exporters Association of India.

“The ban could be a short-term measure for 4-6 months. It is a move to control prices due to a shortfall of the crop in Punjab and Haryana. We expect the World Trade Organisation (WTO) to come in,” said VR Vidya Sagar, Director, Bulk Logix. 

In May last year when the Centre banned wheat exports, the issue was raised at the WTO with some countries charging India with distorting the market. However, India justified the move as one to ensure its food security. Besides, it assured to supply foodgrain to nations that were vulnerable to food security.

For the ban on white rice exports, too, it has said it will permit shipments to countries that approach it for meeting their food security needs. This is in line with its decision allowing exports of fully broken rice to African nations such as Senegal, Gambia and Djibouti. “Pakistan and Vietnam could be the immediate gainers from this move,” said Rajesh Paharia Jain, an exporter from New Delhi. 

‘Timely one’

Terming the ban as a timely one, Chandrasekaran said it became inevitable to combat inflation and protect food security. He discounted fears that India might lose its numero uno position in the global market. “Indian rice exports will not lose its market position as it is driven by price competitiveness. It could come back whenever the Centre reviews its policy,” he said. 

The Centre should fix a minimum export price for export of parboiled (boiled) and basmati rice to check illegal shipments of white rice. 

The ban on white rice exports comes 10 months after the Centre curbed rice exports following fears that there could be a supply shortage following deficient rains in key rice growing areas in eastern parts of the country. 

In the notification, the DGFT said rice that was being loaded on ships before the notification will be allowed, while for vessels that have anchored can load only after confirmation from port authorities. 

Consignments handed over to Customs before the notice and registered in the Department’s system or have entered the custom station and registered with verifiable date and stamping would be allowed until August 31. 

The Centre’s decision comes following tardy progress in paddy showing, which was 8.5 per cent lower than last year at 122.18 lakh hectares (lh) as of July 14. Besides lower acreage, the paddy crop sown in Haryana and Punjab are feared to have been affected badly due to recent rains.

On the other hand, rice stocks with the Central pool maintained by the Food Corporation of India (FCI) dropped to a seven-year low of 25.34 million tonnes(mt). The agency has an additional 23.3 mt of unmilled paddy (15.72 mt of rice). 

According to the Ministry of Consumer Affairs, the average rice prices as of July 20 was ₹40.89 a kg against ₹40.08 a month ago and ₹36.7 a year ago.