Indonesia has been in talks with India to import one million tonnes (mt) of rice for quite some time now, but no deal has been reached yet, trade and official sources said. 

Official sources in India denied that any memorandum of understanding (MoU) has been signed with Indonesia for rice trade as was reported by some news agencies, particularly Indonesian news agency Antara

Indonesia Trade Minister Zulkifli Hasan was quoted by Antara as saying that his ministry signed an MoU on importing one mt of rice from India to face the risk of the El Nino weather phenomenon. 

Deficient rainfall

Rice growing nations, such as Thailand, Vietnam, and India, fear their crops could be affected by El Nino, which leads to deficient rainfall and drought in Asia. 

According to Thailand’s Kasikorn Research Centre, a subsidiary of Kasikorn Bank, rice production in the South-East Asian country could decline by 6 per cent. In India, the rainfall is 37 per cent deficient during the current South-West monsoon. This has resulted in the paddy acreage trailing by 14.6 per cent as of June 16. 

Also read: El Nino may not always singe the market

Hasan said the MoU encompasses the price and availability of Indian rice. However, the purchase time has not been decided.

“This is just an MoU for a fixed price. The goods exist, but we have not purchased them,” Hasan said.

‘Why no noise?’

He said a government-to-government MoU already exists. “This year, if we need them, we can buy them,” he said. Hasan’s statement comes on the heels of Jakarta permitting its bureau of logistics Perum Bulog to import two mt of rice

However, official sources in New Delhi said no trade deal has been signed yet with Indonesia on the rice export deal. 

Trade sources said India and Indonesia have been in talks over the past few months but nothing had fructified yet.

“If Indonesia had signed an MoU, do you think it would have been done quietly?” a trader wondered. 

However, another trade source said the deal will likely happen soon as The Rice Exporters Association (TREA) is in touch with the Indonesian embassy in New Delhi. 

Also read: G2G demand for broken rice mostly from African nations, say officials

To help get more than MSP

In a letter to Union Agriculture Secretary Manoj Jha, TREA president BV Krishna Rao urged the Centre to sign an MoU with Indonesia for exporting one mt of rice “at mutually beneficial prices”. 

“We understand that such an MoU is not legally binding on either government. However, by consenting to such MoUs, the Ministry of Agriculture can facilitate farmers in obtaining prices higher than minimum support price (MSP),” Rao said.

Such an MoU will not only contribute to foreign exchange earnings but also help reduce the trade deficit “between the two friendly nations”, he said. 

One reason why Indonesia, which usually overlooks Indian rice for imports, is looking to India to meet its demand for the foodgrain is its competitiveness. 

Competitively priced

Indian rice is priced at least $30 a tonne lower than rice from Thailand or Vietnam. The competitiveness is despite New Delhi imposing a 20 per cent export duty on shipments.

According to the Thai Rice Exporters Association, 5 per cent broken Indian white rice is quoted at $453-57 a tonne compared with $509 quoted by Thailand and $478-82 by Vietnam.

Data from Agmarknet, a unit of the Ministry of Agriculture, show that the weighted average price of common paddy across agricultural produce marketing committee yards is ₹2,094 a quintal against the MSP of ₹2,040. For the kharif marketing season starting October 1, the MSP has been increased to ₹2,183.

Also read: Centre hikes kharif crops’ MSP by 5-10%; does not see impact on inflation

According to the Agricultural and Processed Food Products Export Development Authority, non-basmati rice exports from the country were higher at 17.79 mt, valued at $6.3 billion, in the 2022-23 fiscal compared with 17.29 mt, valued at $6.13 billion, in 2021-22. 

Basmati rice exports, on the other hand, increased to 4.56 mt, valued at $4.79 billion, against 3.94 mt valued at $3.53 billion during the same period. 

India’s rice exports have been buoyed by another record production of 135.54 mt during the current crop year (July 2022-June 2023) compared with 129.47 mt last crop year.