In a strategic move to manage the burgeoning rice shipments, the Indian government has promptly imposed a 20 percent export duty on parboiled rice. The Ministry of Finance, through a recent notification, revealed this measure, which will remain effective until October 15. Simultaneously, the commerce ministry is set to establish a minimum export price (MEP) of $1200 per tonne on basmati rice exports, designed to control outbound shipments.
Reason for ban
The surge in rice exports, a potential catalyst for inflation, prompted this decisive action, as underscored in Prime Minister Narendra Modi’s Independence Day address. The new export regulations aim to bolster domestic rice availability, alleviating the pressure on local markets. While the Finance Ministry cites immediate enforcement of the export duty, exporters with pre-existing contracts signed before the notification can export their consignments at zero duty until October 15. This provision seeks to mitigate disruptions for those operating under prior commitments.
A strategic buffer
The core intention of these measures is to pause shipments, allowing the government to gain insights into the anticipated rice production by October 15. This temporal intermission serves as a strategic buffer. The decision to implement the MEP for basmati rice exports was formulated by the committee of secretaries (CoS), spearheaded by the cabinet secretary on August 21.
In a unique approach, the Agricultural and Processed Food Products Export Development Authority (Apeda) will oversee the implementation of the MEP for basmati rice, as opposed to the traditional role of the Director General of Foreign Trade. This is due to the requirement of registering contracts with Apeda before exporting basmati rice, which issues essential certificates.
Apprehensions about crop
While the current kharif season exhibits a 4 percent growth in paddy cultivation compared to the previous year, the state of crops in the Southern States is raising alarms. Reports indicate a distressing deficiency in rainfall across many areas. Particularly noteworthy is the predicament of Karnataka, which witnessed a staggering 75% shortfall in rains from August 1 to 25. Such adverse conditions are sparking apprehensions about the overall crop performance.
In conclusion, India’s proactive measures on rice exports, including export duty and MEP imposition, reflect a strategic approach to maintaining price stability, ensuring domestic supply, and addressing the complexities arising from variable crop conditions.