MSP impact! Rice exports may fall in FY19 for the 1st time in 3 years

New Delhi | Published: November 20, 2018 5:18:42 AM

Rice exports from India, the world’s largest producer of the cereal, may decline for the first time in three years in 2018-19 owing to a 13% hike in minimum support price for paddy (kharif 2018) and a drop in demand from Bangladesh and several other key markets.

rice in india, rice growing states, rice exports, commodities, kharif cropIndustry sources said registration for basmati export contracts during October declined to 2.05 lakh tonne from 2.51 lakh tonne in the year-ago month.

By Prabhudatta Mishra

Rice exports from India, the world’s largest producer of the cereal, may decline for the first time in three years in 2018-19 owing to a 13% hike in minimum support price for paddy (kharif 2018) and a drop in demand from Bangladesh and several other key markets. While a decline is most likely in volume terms, exports could at best see a flat growth in value terms, trade sources said.

While traders have cut down on shipments of non-basmati rice due to lower prices in key export markets, export contracts registered for basmati rice in October were also lower by 18%, sources said. In value terms, basmati varieties account for roughly 60% of India’s overall rice exports.

The possible decline in exports this year comes after a big jump in exports last fiscal. India’s rice exports in 2017-18 touched a record 12.71 million tonne ($7.74 billion), up from 10.76 million tonne ($5.75 bn) in the previous year. In April-September this year, India exported just 5.8 million tonne (mt) of rice worth $3.8 bn.

“Bangladesh was a big market for us last year for non-basmati rice. However, production this year is higher there, so the country may not import much whenever it opens the import window,” said B V Krishna Rao, president of Rice Exporters Association, a body of traders and processors dealing with non-basmati rice.

The higher MSP would also dent Indian exporters’ competitiveness in the global markets, which have turned to be a buyers’ market. According to the official data, non-basmati shipments dropped 13% in April-September this year to 37.23 lakh tonne while basmati rice exports fell 2.4% to 20.82 lakh tonne. However, due to better realisations, basmati exports were higher in value terms by 6% at $2.25 billion whereas non-basmati variety was down (12%) in value terms too.

Trade sources said that many exporters have delayed signing of contracts for non-basmati rice for four months till October to claim higher prices after the revised MSP became effective. The fall in exports the first six months may not be covered in the second half unless China buys significant quantity in November-December, the sources said.

The government in July this year increased the paddy MSP 13% to Rs 1,750/quintal, the biggest hike in six years. It was part of an electoral promise to ensure farmers get at least 50% profit over cost of crops for which MSPs are fixed. Overall, the MSPs of kharif crops were raised by 4-52% for 2018-19 crop year(July-June).

Industry sources said registration for basmati export contracts during October declined to 2.05 lakh tonne from 2.51 lakh tonne in the year-ago month. Already, there was a fall in exports of basmati rice to the tune of about 52,000 tonne in first half of this fiscal from the year-ago period.

“The exports of basmati may recover during second half,” said Vijay Setia, president of the All-India Rice Exporters’ Association. “Iran has not yet started issuing import permits. Once the process is resumed, we can have an idea of how much it requires. India has the rupee arrangement with Iran and that is going to help them to buy from us,” Setia said.

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