Commodity Analysis

Dip in basmati export earnings worrisome

G. Chandrashekhar | Updated on March 10, 2018 Published on November 05, 2017

Lower availability, higher prices have hurt the export prospects of this aromatic rice

Basmati rice, a multi-billion dollar export commodity, is unfortunately on a decline over the last three years. This year (2017-18) it could get worse, with tighter availability, higher domestic prices and lower exports. Following deficient south-west monsoon in the principal growing States of Uttar Pradesh, Punjab and Haryana, the area under Basmati rice cultivation is estimated to be about 8 per cent lower this year and so, production could decline.

No wonder, market prices have been rising in the last two months. Lower availability and higher prices have combined to hurt the export prospects of this aromatic, long-grain premium rice that the country is famous for.

Major buyers of Indian basmati rice include Saudi Arabia, Iran, the UAE, Iraq, Kuwait, Yemen, the US and the UK as also Oman and Qatar. While the quantum of export has stagnated at around four million tonnes in the last three years, value realisation has consistently dipped.

From ₹27,587 crore in 2014-15, export earnings declined to ₹22,719 crore the following year and further down to ₹21,605 crore in 2016-17. In other words, the unit value realisation has been falling.

Falling exports is a cause for concern because we are the dominant player in the international market. Perhaps the only competitor is Pakistan, given agro-climatic conditions nearly similar to that of India.

It is necessary to examine the reasons for fall in export earnings while there has not been any marked dent in the quantum of demand. The Commerce Ministry’s explanation that decline in value of export is solely due to decline in international prices of Basmati rice is not only perfunctory but also seeks to shove the issue under the carpet. Market watchers are wondering if there is something more than meets the eye.

Marketing is key to maximise export and for capturing appropriate value. Importantly, from a long-term perspective, there is need to de-risk this export-oriented premium grain from the vagaries of weather. More research and investment is necessary in building climate resilience and for further strengthening the country’s position as the principal producer and exporter.

The government mandated export promotion agency APEDA (Agricultural and Processed Food Products Export Development Authority) has its job cut out. In February last year, Basmati Rice as a Geographical Indication was registered, effectively warding off threat from clones from other origins. More than a decade ago, the US tried to cultivate in Texas (Texmati) but the effort did not succeed.

Admittedly, there has been a decline in the planted acreage as also fall in production (by 2 million tonnes to 94.5 million tonnes) of rice (Basmati and non-Basmati varieties) this year but in the case of Basmati, the decline is more pronounced.

Non-Basmati rice varieties have shown a mixed trend in exports over the last three years. From 8.3 million tonnes valued at ₹20,442 crore in 2014-15, export shipments collapsed to 6.5 million tonnes worth ₹15,483 crore the following year but managed to slightly recover to 6.8 million tonnes valued at ₹17,145 crore in 2016-17.

According to Agriculture Ministry data, since 2011-12, annual production has remained well above 100 million tonnes mark. Yields are beginning to gradually improve in the kharif season, currently 2.4 tonnes a hectare versus 2.0 t/ha 10 years ago.

Climate change impact

Yet we have a long way to go. We are the world’s second largest rice producer after China. The Asian major’s rice yields are close to 3.5 t/ha. If Indian rice yields were to rise to even 3 t/ha, on a planted area of 44-45 ml ha, we will harvest 135 million tonnes, a volume we may not be currently equipped to handle.

Rice is a water guzzler and going forward, the adverse effects of global warming and climate change can hurt production of this important staple grain. It is necessary to invest in research for enhancing rice (paddy) yields and harvest more crop per drop. Modernisation of rice mills to capture scale economies and value chain efficiencies will help too.

The writer is a global agribusiness and commodities market specialist

Published on November 05, 2017
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