Indian rice exporters are allegedly under-invoicing their white rice shipments to overcome the 20 per cent export duty imposed by the Government from September 9.

However, a section of the exporters say the duty worked out by the Customs authorities works to nearly 30 per cent and hence, shippers are making  adjustments for that. 

“There are various ways in which the under-invoicing is taking place. It is being done in the case of assorted and a batch of containers,” said a trading source. Exporters and traders spoke to businessline without wishing to identify in view of the sensitivity of the issue. 

‘Not a major scandal’

A Mumbai-based exporter said: “We are actually charged 30 per cent export duty when we quote the cost and freight (C&F) price in our invoice. Customs authorities detect the freight charges and then work the duty. We include the 20 per cent duty too in the invoice but Customs have their own way of calculation.”

The trading source said the under-invoicing is happening with white rice shipments to almost all destinations. “It is more for consignments to the Gulf and Singapore,” the source said. 

“There are similar under-invoicing for shipments to Sri Lanka. We were offered an opportunity but we rejected it,” said a Chennai-based exporter. 

An exporter from the East Coast said there are possibilities of under-invoicing though he has not come across any such development. “It is not a major scandal. It is likely to happen here and there. Under-invoicing is possible when the export duty is 20 per cent,” the exporter said.

Case of premium rice

The trading source said the under-invoicing was happening mainly in the case of premium white rice varieties such as BPT 5024, Sona Masuri Kolam and RNR. 

“These are premium varieties which were fetching $550-650 a tonne before the duty was imposed. After the duty, the price should have gone up by $70-90 but prices remain the same,” the source pointed out.

“In the case of the Sorna rice variety, prices almost touched ₹30 a kg before dropping to around ₹22 now. But the drop is not reflected in the export price,” the source said.

However, in some cases, exporters are managing the duty from the margins they get. The source said shipments were being cleared fast in Mumbai, Kolkata and Mundra ports, while they were slow in Chennai and Thoothukudi.

Spreading out costs

According to the Thai Rice Exporters Association, India’s 25% broken white rice is up $35 a tonne at $363-367 a tonne, while 5% broken is up $40 a tonne from September 8, when the notification on the duty imposition was issued. 

The trading source said in assorted containers, the under-invoicing is adjusted by spreading prices to costs of other commodities in those containers. In the case of a batch of containers, too, the under-invoiced consignment prices are distributed among the ones which are duty-free. 

“It can happen in the case of Basmati too, where non-Basmati can be shipped as Basmati at a higher price and then the excess can be routed through the hawala channel,” the source said. 

MEP or fixed duty?

Exporters were unanimous that the Centre will have to think of some other way to curb such activities. “The Centre can think of fixing a minimum export price,” said the Mumbai-based exporter.

“Even that can lead to problems, where hawala can take place. The best will be to impose a fixed amount in dollars as duty, say $50 a tonne,” said the exporter from the East Coast.

“The situation is fluid and it will take some time before the exporters and the Government come to an understanding and things are settled to everyone’s satisfaction,” the Mumbai-based exporter said. 

India imposed a 20 per cent duty on white rice imports from September 9, while banning shipments of broken rice. It, however, exempted Basmati and parboiled rice from any curbs in shipments as part of its efforts to overcome any adverse situation arising out of lower sowing of paddy during the current kharif season and lower stocks with the Food Corporation of India (FCI).

As of September 1, the FCI had 24.46 million tonnes (mt) of rice and 16.16 mt of paddy stocks, a three-year low.