Rice & sugar to the rescue, even as overall exports stagnate

Written by Sandip Das | Banikinkar Pattanayak | New Delhi | Updated: Apr 23 2014, 10:52am hrs
Even as Indias overall exports are crawling, exports of farm items that have seen a phenomenal rise in recent years are keeping pace and increasing their share in the countrys foreign trade. Exports of farm items and allied products accounted for 14.4% of the countrys exports (of $312.35 billion) in FY14, compared with 13.9% in FY13 and 12% in the previous year. While a sustained rise in exports has been in evidence for the last two to three years in respect of many farm products, rice and, of late, raw sugar exports accelerated further.

Indias merchandise exports witnessed a drop in four out of the 12 months in the last financial year, and the annual growth was a mere 4% despite a low base (exports declined 3.2% in FY13). While a sharp increase in demand from the US and some countries in West Asia, Africa and Europe has led to a 29% annual increase in rice exports in FY14 to R42,668 crore, the countrys raw sugar exports jumped dramatically in the first half of the current marketing year that started on October 1.

India, the worlds second-largest sugar producer and the biggest consumer, exported 1.45 million tonnes of both raw and refined sugar during the October-March period (valued at close to R4,000 crore), compared with just 35,000 tonnes a year before. This time around, the jump in exports of sugar, which have traditionally been influenced by inconsistent government policies, was partly because mills scrambled to cash in on a subsidy for raw sugar production and also to reduce a glut in refined sugar.

As for rice exports, the demand for basmati, which accounts for over 65% in the overall value of export of this grain, is mainly from Iran, Saudi Arabia, the UAE, the US and Europe. Non-basmati varieties are in great demand in some African countries, including Benin, Senegal and South Africa, besides the US. That per-unit export realisation has also risen is evident from the fact that the increase hasnt kept pace with the rise in rupee value of exports. Rice exports reached 10.4 million tonnes last fiscal, only marginally higher than shipments of 10 million tonnes in FY13.

Rice exports, in fact, have been rising steadily since the government lifted a 4-year ban on non-basmati rice exports in September 2011.

What triggered the export boom is also a relatively stable and liberal policy regime in recent years when it comes to shipment of farm products. There has been lesser instances of a sudden imposition of bans and restrictions on farm items in recent years.

Also, processing and packaging has improved, resulting in importers accepting the standards of Indian products. Indian exporters of grain, meat products, guargum and fruit and vegetables have gained the confidence of consumers in many countries.

The sharp rise in demand from Iran and devaluation of the rupee against the dollar has helped the country's export earnings, Vijay Setia, former president of the All India Rice Exporters Association (AIREA) and an exporter, told FE. Setia said the export of basmati rice would have increased by an additional 2-3 lakh tonne in the last fiscal if imports by Iran had not slowed down during the last few months of the year. Commerce ministry sources said that Iran in a bid to curb further rice import for protecting domestic growers have put stringent sanitary restrictions on Indian exports.

While it is great to see India emerging as the largest exporter of rice, we should remember part of this is due to highly subsidised water, power and fertilizers. Exporting a kg of common rice is like exporting 3,000-5,000 litres of water. I would suggest a 5% export duty on common rice to recover part of that scarce water/power," said Ashok Gulati, chair professoragriculture, Indian Council for Research on International Economic Relations.

Sugar mills exported in large volumes to cut a glut in the domestic market following a fourth straight year of surplus production. Raw sugar exports did particularly well in March as the government incentivised its production and, thereby, exports as the sweetener variety is hardly consumed domestically. The exports will get a boost if the food ministry announces the subsidy for raw sugar production for April and May immediately, without delay, said Abinash Verma, director general of the Indian Sugar Mills Association.