Export curbs on rice, edible oils and cotton could be lifted in Nov

The case for lifting the export restrictions on non-basmati rice, edible oils and cotton has strengthened after the government removed the bars on maize exports this week?the first relaxation after farm goods came under the scanner in April as inflation soared.

The sharp fall in local and international prices of these commodities and bulging stocks in government granaries have prompted the government to examine lifting the ban and other restrictions.

The Indian basket of crude oil too has finally dropped below the psychological barrier of $61 a barrel, the level at which the government had promised it will consider a cut in the domestic fuel prices.

According to official sources, discontinuation of the ban on exports of non-basmati rice & edible oils and relaxing the curbs on cotton exports could be favoured under the changed market conditions.

?We will review the situation at a group of ministers? meeting in November,? a senior government official involved in the review said.

Going by price trends, production and stock positions, rice could be the first commodity to go off the banned list.

By the government statistics, rice production in the Kharif season would reach a record of 83.25 million tonnes, up from the earlier estimate of 2.81 million tonnes, despite floods damaging around 2 million hectares of paddy crop in Bihar. There will be another 12 million tonnes added in the Rabi sowing season.

On top of this, government granaries are brimming with rice and wheat. The buffer stock of rice on October 1 was around 6.45 million tonnes against the norm of 5.2 million tonnes, and total foodgrains stocks with government is in excess of 30 million tonnes.

This should give a cushion to the government even if rice prices show a rising trend.

Government data shows between March and September, retail prices of rice rose by just around Rs 1-2 per kg in the local markets. They are expected to go down as the new season harvest starts arriving in the market in full swing.

?We have already purchased more than 3.6 million tonnes of rice from the new crop that arrived early this year and are confident of matching last year?s procurement target of 28.5 million tonnes by the time procurement ends,? a senior official from FCI, the nation?s nodal foodgrain procurement and storing agency, said.

Experts said with benchmark Thai rice prices falling below $700 per tonne in the international markets from their peaks of over $1,000 per tonne, there is little possibility that global markets would have any lasting impact.

The UN Food and Agriculture Organization (FAO) estimates world paddy output in 2008 to be at a record 672 million tonnes, up 2% from last year.

?The increase reflects favourable weather conditions, as well as attractive market prices and government incentives, which are anticipated to boost planted areas and yields,? FAO latest report on world rice market said. FAO added that Asian countries are likely to account for much of the global expansion, as 609 million tonnes are set to be harvested in the region, 10 million tonnes more than last year.

Ban on edible oil exports could also reviewed in the light of a 40% fall in global palm oil prices since May, the benchmark for world edible oil markets. This ban too was imposed in April. In the local markets, already growers in main oilseed growing regions have started holding on to their stocks in the light of a sharp fall in prices, and industry sources believe that if the situation continues for long, crushers would find it extremely difficult to source oilseeds.

Soyabean oil prices have shed almost Rs 6,000 per metric tonnes in the local markets in the last one month and are currently quoted at around Rs 51,000 per tonne, while in the international markets prices have dropped by around $148 per tonne after September. The benchmark crude palm oil prices in Malaysia have dropped to around $520 per tonne, from around $680 per tonne just over a month back.

?With such a sharp fall in prices, government should re-impose the import duty on crude and refined edible oils to save growers and local processing industry,? said BV Mehta, executive director, Solvent Extractors Association of India. Also up for review would be the government?s decision to scrap the import duty on cotton and the withdrawal of export incentives under the duty entitlement passbook scheme done in July.

Cotton imports attracted 10% basic customs duty and 4% special additional duty. Cotton prices have risen by more than 30% in the last one year to around Rs 28,000 per tonne, from around Rs 21,000 per tonne a year ago, mainly due to strong demand and surging exports.

But, lately they have again fallen to around Rs 22,000 per tonne, and with production expected to be a record over 32 million bales (a bale is 170kg), pressure is on the government to allow freer exports.