India invokes 1939 law to deal with exports of rice with ‘brokens’

The Indian government has invoked a 1939 order as a solution to clear shipments of rice that have the “presence of certain content of broken rice”.

However, exporters say it creates more confusion and obstruction than allowing the shipments. The confusion has cropped up after the Centre curbed rice exports from September 9. While it banned exports of non-basmati white and broken rice, it has permitted shipments of parboiled and basmati rice.

Wrong definition

In a trade notice on September 28, the Directorate-General of Foreign Trade (DGFT) said it had received representation from the trade and industry on the problems faced by exporters in clearing consignments of other categories of rice due to the presence of the broken rice. 

The DGFT said, “Considering the hardships faced by the trade community and in order to facilitate exports, it is clarified that wherever difficulty is being faced, the limit of tolerance of ‘broken rice’ in consignments of rice for export may be allowed in terms of ‘The Rice Grade and Marketing Rules, 1939.”

A trade analyst said the order itself referred to the law wrong. “Pity, it is not marketing but marking. Wonder how this has escaped the scrutiny of so many officials who saw this document,” the analyst, who did not wish to be identified, said. 

“The whole issue boils down to the definition of broken rice and how the trade classified it. Unfortunately, the 1939 law is not the right one,” the analyst said. 

EC classification

The European Commission (EC), in its classification in 1967 regulation, said a “broken rice” is from which a part of the volume greater than the end has been removed. Broken grains include large broken grains (pieces of grains of a length not less than half that of grain, but not constituting a complete grain). 

The grain is damaged during processing or transportation or in the field, the length does not exceed three-quarters (75 per cent) of the average length of the whole kernel.

“All these specifications are of Agmark and outdated. They are not as per international standards and specifications. Even Food Corporation of India does not follow these rules,” said a North India-based exporter on the condition of anonymity.

A South India-based exporter pointed out that the 1939 law does not deal with the export of rice in polypropylene bags, including in bulk. “It talks of exports in jute bags only,” the shipper said, refusing to be quoted. 

More chaos

Exporters say there cannot be more than 12-15 per cent of broken grains in a consignment, which again is an impediment. “And the kernel’s length cannot be lower than 6.4 mm,” said the North India-based shipper. 

“The clarifications and orders have only led to more confusion at the ports. Either Customs authorities say the rice is not parboiled or have more broken content,” said the southern miller. 

In view of this, at least 0.9 million tonnes (mt) of white and broken rice for which letters of credit had been opened before September 8, the day on which the ban order was published, and are in transit are pending for shipments. 

The analyst said the Centre could draw from the European Commission’s definition of broken rice to allow shipments to continue rather than allow the confusion to persist. 

Exporters facing losses

According to Nikhil Gupta, an aggregator, thousands of parboiled containers have been held at Nhava Sheva and Mundra ports since the broken percentage has been mentioned. The hold-up has led to exporters paying demurrage and rent charges, apart from container cancellation fees. “This is causing losses to exporters,” he wrote on Linkedin.

He said exporters must mention the broken percentage as per norms as otherwise, it could become a case of “misdeclaration”. In addition, countries such as Saudi Arabia require shippers to mention the broken percentage on the bags. 

These problems are occurring despite Customs authorities being aware that rice does contain some amount of broken grains, he said.

The South India-based exporter said shippers have begun to pay the 20 per cent export duty and ship the consignments since they fear that with the monsoon setting in South India this month, the shipments could be affected.  “We are waiting for the Centre to set right these problems,” he said. 

The Centre curbed rice exports as the kharif paddy acreage is lower due to deficient rainfall in key growing areas of Bihar, Jharkhand, West Bengal and east Uttar Pradesh. In addition, rice stocks with the FCI are lower than last year as of September 1 at 24.46 mt (26.83 mt a year ago). Unmilled paddy stocks, too, are lower at 16.16 mt (17.60).

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