Floor price on white rice exports unlikely to affect shipments

The $490 per tonne minimum export price (about ₹41/kg) for non-basmati white rice will not affect shipments from the country as feared by a section of the trade. Some States such as Telangana, Odisha and Telangana have announced a bonus for farmers over and above the minimum support price (MSP) of ₹2,320 a quintal. But a cap put by the States on procurement from farmers will ensure that there will be no problem in shipping the foodgrain, exporters said.

“The market rate of paddy was as low as ₹18/kg before the MEP was announced and it has increased to ₹22.10/kg,” said Mukesh Jain, president of The Rice Exporters Association (CG). He said since Chhattisgarh has fixed a cap of 21 quintals per acre at which it will buy the paddy from farmers at €3,100/quintal, farmers whose productivity of paddy is higher have to sell the surplus in the market.

A trade analyst said most farmers in Chhattisgarh are small and medium and the surplus that could be available in the open market could be limited. “The (bonus) policies are targeted at small and medium farmers,” said the analyst.

Jain said Chhattisgarh has enough rice production and it used to export 30 lakh tonnes (lt) a year before the ban was imposed in July 2023. He said Odisha has already announced that it would follow the Chhattisgarh model (by fixing a cap per acre).

Telangana strategy

Telangana, which has announced to buy paddy at about ₹2,800/quintal, has already clarified that the common variety paddy will be procured at the MSP and only the superfine varieties would fetch the ₹500/quintal premium.

A leading rice exporter from Kakinada said port-based rice millers in Andhra Pradesh, where the government is yet to announce any bonus, will enjoy an advantage.

According to calculations, the export price will exceed ₹41/kg if exporters buy paddy at MSP. A simple conversion to rice makes the cost ₹34-35/kg (100kg paddy=67kg rice). There is a ₹4/kg additional cost as port handling charge ( ₹2/kg) and inland freight ( ₹2/kg). Exporters, while purchasing paddy from Andhra Pradesh, will save ₹1/kg on inland freight) Further, if profit is added the exportable FoB price will be around ₹41/kg.

Drop in exports

“Farmers in Chhattisgarh do not complain about selling at lower than MSP since they are getting a very high price for the majority of their produce. They know that exporters and traders cannot pay at what the government has been paying,” said an exporter requesting anonymity.

The analyst wondered why consumers abroad should be subsidised at Indian farmers cost.

The export ban resulted in India’s non-basmati rice exports dropping to 111.2 lt in the 2023-24 fiscal from 177.9 lt in 2022-23. During April-July of current fiscal, India has exported 33.41 lt of non-basmati rice worth $ 1.6 billion.

However, the trade analyst said the MEP will likely put an end to the reported diversion of rice from the public distribution system (PDS). Trade sources said earlier when Indian exporters bidded aggressively for tenders, particularly in Bangladesh, rice from the PDS was diverted, polished and shipped.

With inputs from Subramani Ra Mancombu, Chennai