EGoM to decide on basmati MEP on Feb 7

Written by Sandip Das | New Delhi | Updated: Jan 23 2012, 08:09am hrs
The government will consider lowering of the minimum export price (MEP) for basmati rice in a meeting of the Empowered Group of Ministers (EGom) on food scheduled for February 7.

The Indian exporters have been demanding a lower MEP, which is $900 per tonne currently. Indias only competitor, Pakistan, does not follow any MEP regime.

Due to a bumper basmati rice harvest and depreciation of rupee against dollar, the price realisation from the exports of the aromatic rice variety has fallen to an average $700-$ 800 per tonne in the global market. Within a year, global basmati rice prices have fallen from $1,100 to $700 a tonne.

However, Indian exporters cannot price their shipments below $900, which makes them uncompetitive, effectively blocking exports. Basmati exporters from Pakistan do not face such hurdles.

Till December, the exporters were supplying rice from last years carry-forward stocks as old stocks of aromatic rice command better price in the global market. However, for this years kharif harvest, due to higher MEP, exporters are unable to execute the order.

For the last few months we have been asking the government to reduce MEP. The decision to reduce MEP could have been taken by the commerce ministry rather than waiting for EGom to take a call, which results in delays in the process, Vijay Setia, President, All-India Rice Exporters Association (AIREA), told FE.

Bumper harvest in Punjab, Haryana and western Uttar Pradesh, large stocks and poor demand from weakened Western economies have combined to depress basmati prices. Settlement of payments from Iran, the biggest buyer of the premium Pusa 1121 variety, has compounded exporters problems.

Even commerce secretary Rahul Khullar in November last year had acknowledged the problems faced by exporters and said, Exporters have petitioned us and we are aware of their difficulties. We will decide shortly on lowering the MEP.

When there is no MEP for non-basmati rice, imposing an MEP is irrelevant and creates hurdles for export growth, said RS Seshadri, director, Tilda Rice Land, a leading basmati exporter.

Last fiscal, India exported 2.2 million tonne basmati worth R10,582 crore and if present trends are any indication, the numbers will be higher this year.

Sanctions on Iran have hit exporters in the last few months. Payments from Iran, Indias biggest basmati buyer, have slowed down due to a freeze in dollar transactions.

Iran and Saudi Arabia make up close to 60% of basmati exported from India.