India’s basmati rice exports have seen fluctuations in fortune in the last couple of years because of factors such as slowing down in shipment to Iran, the country’s biggest export destination for aromatic long-grained rice, and delay in settlement in payments from importers. Vijay Setia, president, All Indian Rice Exporters Association (AIREA), spoke to FE’s Sandip Das on critical issues currently impacting the exporters and millers. Edited excerpts:
What are the key issues rice exporters and millers would be facing post GST scenario?
Although the GST council has recommended 5% taxes on branded rice while exempting the cereals from taxes, we feel that it would make rice sold to economically weaker section costlier. In the current scenario, the processor has to put several information such as name of the company, date of packing etc. as per requirement of weights and measures department and Food Safety and Standards Authority of India on the rice pack.
This would make the rice pack as ‘branded’ thus inviting taxes. The next GST council meeting must address the issue as the government has already promised zero tax on rice under GST regime. States with high local taxes such as mandi fees, arthia (commission agents) commission – 2%, rural development cess (2%) etc. on grain trade mostly prevalent in Punjab, Haryana and others. It should be reduced drastically in the post GST roll out. Because of higher taxation, processors or millers are not willing to set up units in these key producing states.
You have been pitching for stopping prevalent practice of documents against acceptance (DA) in non-basmati rice exports while in case of basmati rice shipment, DA has been stopped by the commerce ministry. What are the measures AIREA proposes for exporters to follow so that there are no delays in settlement of payment for rice exported?
Because of the prevalence of DA, mostly resorted by small sized basmati rice exporters had become a buyers’ market. Often, consignments are not lifted from the port by importers, and thus, the price has to be renegotiated leading to lower realisation. In a fiercely competitive basmati rice exports trade, small players in order to increase the volume of shipment often send rice consignment to importers who use this unsecure credit to their advantage.
We feel that because of the practice of DA, the country’s basmati rice shipment has seen a 29% fall to Rs 22,714 crore in FY16, from a record Rs 29,291 crore reported in FY14. However, the volume of basmati exports has risen from 3.7 million tone (MT) to more than 4 MT in the same period. In FY17, despite lower shipment to Iran, our exports declined to around 5% to Rs 21, 605 crore in comparison to previous fiscal. Thus we has urged government to end the practice of DA in exports of non-basmati rice as well.
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Basmati rice exporters are currently following two modes – cash against document (invoices are delivered to the importer only against payment) and letter of credit (importers instruct their bank to pay exporters as per the specified conditions mentioned in the original documentary credit). These two methods which are followed widely globally.
After a sharp fall in basmati rice exports in the last couple of years, what is the prospects of aromatic rice shipment in the current fiscal?
In the current fiscal, the realisation from basmati rice exports are set to increase compared to last few years. We have been looking at new market for shipment of basmati rice. Overall in the current fiscal the outlook for exports is quite bright.