Indo-Pak rice tussle. Pakistan trade alleges India is subsidising rice exports, wants WTO petitioned

Pakistan rice traders have alleged that India is subsidising rice exports in the global export market and want the Imran Khan government to move the World Trade Organization (WTO) against New Delhi.

But, Indian rice exporters and trade analysts say Pakistan may not have a watertight case against India.

Food security

Last week, Rice Exporters Association Pakistan President Abdul Qayyum Paracha alleged that subsidised Indian rice exports were damaging Pakistan’s export market and Islamabad must take up the issue with the World Trade Organisation (WTO) for “jeopardising international food security in violation of its rules.”

Pakistan’s Dawn daily quoted Paracha as saying: “India has offered its rice at an average rate of $360 (₹26,725) per tonne, while we have been quoting $450 (₹33,400). This difference of around $100 (₹7,425) has badly damaged our exports.”

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His allegations were based on Pakistan Basmati and non-Basmati rice exports data for July 2020-May 2021 of the current season ending this month showing a 14 per cent decline in shipments. Pakistan exported 3.3 million tonnes (mt) of Basmati and non-Basmati rice during the period compared with 3.87 mt in the year-ago period.

In contrast, India - world’s leading rice exporters - Basmati and non-Basmati shipments totalled 17.71 mt during 2020-21 fiscal valued at ₹65,297 crore compared with 9.51 mt valued at ₹45,446 crore in the year-ago period.

Reasons for gains

However, the value of non-Basmati exports from India dropped 3.79 per cent, while that of non-Basmati increased 146 per cent. Also, India’s gained since Thailand, Vietnam and Bangladesh, India’s biggest rice buyer, all reported lower paddy production.

A Delhi-based rice exporter said that India performed well in the global market for rice last fiscal mainly since it was able to overcome logistics hurdles created by the Covid-19 pandemic.

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In April this year, Agricultural and Processed Food Products Export Development Authority Chairman M Angamuthu told BusinessLine that despite challenges on the logistics front, the Indian government supported food security needs in other countries and helped at each step to facilitate shipments.

Last fiscal, India began export rice to countries such as China and Vietnam after decades. Last week, Bangladesh cleared a tender to buy 50,000 tonnes of rice from India at $399.90 (₹29,675) a tonne.

During April-May, rice exports are estimated at about six lakh tonnes and they are expected to pick up from this month onwards, said BV Krishna Rao, President, The Rice Exporters Association (TREA).

Questioning low offers

But Paracha pointed out that countries such as Cambodia, Myanmar, Nepal, Thailand and Vietnam offered rice at prices ranging $420-430 (₹31,175-31,925) a tonne and wondered how India could offer at prices lower than that.

The Pakistan rice trade representative claimed that India’s shipments were in violation of WTO rules. But Indian exporters and analysts dismissed his allegation as “mere pressure tactics”.

“Indian prices are based on market movements. Last week, Thailand cut its prices by $50 (₹3,725) a tonne and we had to react to that correction. Exporters buy from millers and ship it and no subsidy is involved,” said a rice exporting firm official on condition of anonymity.

“Pakistan does not have a case,” said the official, whose views were echoed by others too.

“No subsidy is involved in Indian rice exports. Who is providing exports? Pakistan trade is trying to play some trick,” said a Delhi-based trader.

“There is no case against India on rice exports. We have a good crop and hence are able to offer rice at a good (competitive) price. We will be more competitive this year as the production could rise further,” said Vidya Sagar VR, Director, VM Bulk Logix.

Current prices

Currently, India is offering parboiled five per cent broken rice at $365-370 (₹27,100-27,450) a tonne, while white rice 25 per cent broken is quoted at upwards of $390 (₹29,950) a tonne (all F.O.B or free-on-board).

According to the International Grains Council, Thailand’s five per cent broken white rice is quoted at $421 (₹31,250) and Vietnam’s at $460 (₹34,150) F.OB.

Also, India’s rice exports have been helped by a record production during the current season (July 2020-June 2021) estimated at 121.46 mt against 118.87 last season. In addition, India has been carrying record rice stocks with the FCI holding 29.92 mt of rice at the beginning of this month apart from carrying 28.69 mt of paddy that can yield 19.22 mt of rice.

Analytical skills required

A trade analyst, speaking on condition of anonymity, said if Pakistan chooses to file a case against Indian rice exports, it needs someone with good analytical skills to back its allegations.

“Already, the US Department of Agriculture has alleged that India’s domestic support breaches the subsidy levels prescribed under WTO. Pakistan can join it,” the analyst said.

“In particular, they can always point out subsidies for power and other such things, which are termed as non-products specific support and claim it breaches the WTO norms. However, it will all boil down to who is correct in interpretation of the norms,” he said.

But TREA’s Rao said Pakistan had to provide documentary evidence. “It is the same way in which we could not file a case against China,” he said, adding that Islamabad had no case and Paracha’s statement “need not be taken seriously”.

Bali peace clause

The analyst said that in its defence, India can point out that all WTO members had signed a peace clause at the Bali ninth Ministerial conference at Indonesia in 2013 for trade facilitation as per which food security of countries would be considered as key to supporting farmers sustainability. As per this, India cannot be charged with distorting global trade.

“This is a settled issue. India does not provide any cash support to farmers like the developed nations. Offering minimum support prices is a policy decision. Pakistan chas no legally tenable case,” said the analyst, summing up Islamabad’s situation.

The analyst said that due to these reasons, the US has been unable to press its case against India’s domestic support measures.

With the minimum support price for paddy being raised to ₹1,940 a quintal from ₹1,868, more area could be brought under the foodgrain the next season.

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