The Indian Government has permitted duty-free exports of six lakh tonnes (lt) of paddy (rice in husk) to Nepal in a move that is seen as helping the Himalayan nation meet its food security.

In a notification issued on Monday night (October 31), the Ministry of Finance said the quantity permitted will be from the date of notification -October 31, 2022. 

A trade analyst said the move could be a political one as part of India’s efforts to get Nepal away from further strengthening its ties with China. 

Relief for exporters

The notification should come as a relief to exporters since shipments of rice, particularly steamed rice, got held up after India restricted the grain’s exports from September 9.

In a notification issued on September 8, the Centre banned exports of fully broken rice and imposed a 20 per cent export duty on non-basmati white (raw) rice. Basmati and parboiled (boiled) rice have been exempted from any shipment curbs. 

Nepal is a major consumer of steamed rice and it imports nearly 10 lt of the variety annually. Its shipments had got held up after Customs authorities treated it as white rice.

However, the Food Corporation of India clarified that steamed rice does not fall under the category of raw rice since it was being treated. 

In another significant development, the Finance Ministry has permitted duty-free exports of organic non-basmati rice. The analyst said this was a move to promote the export of organic products by the Centre. 

Removing ambiguities

The notification said such organic rice consignments should be accompanied by transactional, including provisional, certificates from an organisation authorised by the National Accreditation Body for Organic Products under the National Programme for Organic Production. 

The Finance Ministry notification has removed all ambiguities on permitting exports of rice, which are banned or attract export duty. It said broken rice shipments would be permitted if the exporter had obtained a letter of credit (LoC) before September 9. 

The notification said non-basmati white rice would be permitted for exports duty-free if the same LoC conditions were met. This comes on the heels of the Directorate-General of Foreign Trade issuing a notification permitting the export of 3.97 lt of fully broken rice for which LoCs had been opened before September 9. 

The Indian Government decided to curb rice shipments after the area under kharif rice dropped 5.5 per cent and central pool stocks with the FCI dropped to a three-year low. As of October 1, rice stocks with the FCI were 20.46 million tonnes (mt) and those of unmilled paddy 11.82 mt. 

However, The Rice Exporters Association (TREA) said the notification had missed a crucial issue by not adding “or” in the notification that allowed duty-free permits of shipments for which LoCs had been opened before September 9. According to BV Krishna Rao, the notification should have said duty-free exports of white and fully broken rice would be allowed if the LoCs had been opened before September 9 “and/or the consignments had entered the container freight stations”.

The missing of “or” could now pose problems for consignments that have valid LoCs but had not entered any CFS before September 9. Efforts are on to get the issue rectified.

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The decision was made, particularly, after the area under paddy during the kharif season dropped by over 5 per cent in view of deficient rainfall in key growing regions in West Bengal, eastern Uttar Pradesh, Odisha, and Jharkhand.

Kharif rice output has been estimated lower at 104.99 mt than 111.76 mt a year ago. 

Export of rice (both basmati and non-basmati) increased by 19 per cent to $5.5 billion from $4.6 billion in the first half of the current fiscal. Non-basmati rice shipments during the period have been pegged at 8.95 mt, almost at par with the year-ago period.