Agri Business

Philippines lowers duty for imports of Indian rice to check rice cartel plans

Subramani Ra Mancombu | | Updated on: Jun 07, 2022
A farmer carries saplings to plant in a rice field on the outskirts of Srinagar. REUTERS/File photo

A farmer carries saplings to plant in a rice field on the outskirts of Srinagar. REUTERS/File photo

Fires first salvo against Thai-Vietnam proposal, says it views New Delhi as an alternative source

Philippines has fired the first salvo against Thailand and Vietnam plans to set up a rice cartel by lowering the import duty on the Indian cereal from 50 per cent to 35 per cent. 

Reacting to the proposal of Thailand and Vietnam, the second and third largest rice exporters in the global market, Fermin Adriano, the under-secretary in the Department of Agriculture, said an executive order has been issued to lower the duty. Manila is considering India as an alternative source of the foodgrain if the South-East Asian nations raised prices and formed a rice cartel, he was quoted by local media.  

Raising farmers income

India is the world’s largest rice exporter accounting for about 40 per cent of global exports. Last year, rice shipments from the country topped 21.3 million tonnes, including Basmati rice. The Philippines imposes 50 per cent duty on rice imports from non-ASEAN nations. 

On May 30, the Thailand government spokesperson Thanakorn Wangboonkongchana said Bangkok and Hanoi planned to increase the prices of the grain to raise farmers’ income and gain bargaining power in the global market. One of the reasons for the plans to form the cartel, according to Wangboonkongchana, is that foodgrain prices have been ruling for almost two decades now even as the production cost has increased. 

Demand recovery

Both the nations came out with such a thought as the global demand for rice is on the way to recovery, overcoming the impact of the Covid pandemic. 

According to the International Grains Council (IGC), India continues to be very competitive in the global rice market with its 25 per cent broken white rice quoting at $342 a tonne during the weekend. Vietnam is quoting $421 for its 5 per cent broken white rice and Thailand $449 for the same grade.

Vidya Sagar VR, Director, Bulk Logix, told BusinessLine that India’s 5 per cent broken white rice is quoted at around $340 free-on-board (f.o.b), while parboiled 5 per cent broken is ruling at $350-55 a tonne, 25 per cent broken white rice at $330 and 100 per cent broken at $320-5. 

Competitive by over $100/tonne

“Rice exports from India are booming now. We are quoting at least $100 a tonne lower than Vietnam and Thailand. China, Vietnam and the Philippines are buying good volumes,” he said.

In particular, the Swarna variety rice is being shipped from West Bengal and this is similar to Sona Masuri rice grown in southern parts of India. “Even for 100 per cent broken, the Swarna variety is getting preference,” Sagar said. 

In the domestic market, the modal price (the rate at which most trades take place) of rice is ruling at ₹1,700-960 a quintal across various agricultural markets in the country against the minimum support price of ₹1,960 for Grade A paddy. 

Govt-to-govt deals

“There is no need for India to join such a rice cartel when its share of the global  exports is 40 per cent. India has publicly committed itself to ensure that it would likely to feed the world and doesn’t want anyone to go hungry,” said S Chandrasekaran, a Delhi-based trade analyst.

This is the third time that Thailand has come out with such a proposal. In 2003, the plan did not take off. In 2008, Thailand wanted to form an organisation of rice exporting countries along with Vietnam, Cambodia and Myanmar. But the Philippines and Asian Development Bank, although Cambodia backed it. However, the proposal was shunned as the world opinion was against such a cartel. 

India has a good chance to export more to the Philippines, said M Madan Prakash, President, Agri Commodity Exporters Association. “The government in Manila is looking for government-to-government exports since private traders importing rice are selling it at a higher price,” he said.

Even otherwise, enquiries from the Philippines are higher, he said, adding that no purpose would be served by India becoming a part of the cartel. “India will have to raise or lower its price as per the cartel’s decision. This will not help the country in any way,” Chandrasekaran said. 

Thai, Viet exporters skeptical

The Thailand Rice Exporters also feel that a rice cartel is not a feasible proposition. However, the exporters’ association has not been taken into confidence over the proposal. “Politicians don’t understand the rice market and did not discuss this with the association,” he said.

The Vietnam Food Association doesn’t favour such an association at a time when there is food uncertainty. India has been able to dominate the global trade as it has ample stocks with it and its production is estimated at a record 129.66 million tonnes in the crop year ending this month. 

Chandrasekaran said Thailand comes out with such proposals when it faces a crisis. But the situation is different from 2003 and 2008. “Trade indication is that this is a government move and not supported by local exporters,” he said. 

Food security initiative 

Meanwhile, The Rice Exporters Association of India (TREA) has launched a food security cooperating initiative with the Philippine Chamber of Commerce and Industry, the Southern Indian Chamber of Commerce and Industry and the Federation of Indian Chamber of Commerce along with the Philippines Department of Agriculture and Department of Trade and Industry.

TREA President BV Krishna Rao said through the initiative, India will help Manila to diversify its import basket in tune with what other large importers such as Indonesia are doing. The initiative was proposed by former Indian ambassador to the Philippines Jaideep Mazumdar. 

During President Ram Nath Kovind’s visit to Manila in October 2019, India had offered its public and private-sector led technical know-how, assistance and investments to improve the productivity of the rice value chain through agri fintech technologies. Besides, it offered help in warehouse receipt financing, predictive natural disaster monitoring and agri mechanisation. 

Published on June 06, 2022
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