Understanding curbs on rice exports

Syllabus: GS3/ Agriculture

In Context

• The Indian government has recently prohibited the export of white rice.

India’s rice production & exports

• About: According to the third Advanced Estimate of the Department of Agriculture and Farmers Welfare, during the Rabi season 2022-2023, rice production was 13.8% less, at 158.95 lakh tonnes against 184.71 lakh tonnes during Rabi 2021-2022.
• India’s rice exports: India is the largest rice exporter globally with a 45% share in the world rice market. 

• Overall rice exports in April-May of 2023 were 21.1% higher compared with the same period last financial year. 
• In May alone, the export of Basmati rice was 10.86% higher than its exports in May 2022. 
• Non-Basmati rice shipments were 7.5% more, despite the government introducing a 20% export duty on white rice and prohibiting the export of broken rice in September 2022.

• Position of Global exporters:
  • Thailand expects nearly 25% lower production in 2023-2024; 
  • Myanmar has stopped raw rice exports; and 
  • The crop is said to be hit in Iraq and Iran as well.

Indian government’s recent move rice exports

• On rice exports:
  • In a move to check domestic rice prices and ensure domestic food security, the Indian government has 
    • Prohibited the export of white rice, 
    • Levied a 20% export duty on par-boiled rice till October 15, and 
    • Permitted the export of Basmati rice for contracts with value of $1,200 a tonne or above. 
  • Export of broken rice:
    • The export of broken rice has been prohibited since last September. However, it is allowed on the basis of permission granted by the government to other countries to meet their food security needs and based on the request of their government.
• Rise in MSP:
  • The government has increased the Minimum Support Price (MSP) for rice, and the paddy procured now by rice millers are at a price higher than the MSP. The prices will not decline for farmers.

Rationale behind government’s move 

• Impact of monsoon/El Nino:
  • The possibility of India’s rice production declining significantly because of deficient monsoon rainfall in Uttar Pradesh, Bihar, Jharkhand and Gangetic West Bengal. 
  • According to Trade and rice millers, El Nino effects are likely to impact new season crop arrivals to some extent.
• Depleting stocks for rice:
  • The stocks for rice, at 40.99 mt, was quite comfortable, but the government is worried about their depletion in the event of a sub-par kharif harvest. 
  • This is more so, given the political pressure to continue the free-foodgrains scheme (Pradhan Mantri Garib Kalyan Anna Yojana). 

Outcomes of the move

• The restrictions on exports will ensure that there is no steep climb in rice prices in the market. 
• When the benchmark price set by the government is high, the farmers will realise better prices. 
• For domestic consumers, though there is a slight increase in rice prices at present, in the long run, availability is secured and prices are not expected to spiral.

Suggestions & way ahead

• Prices of Indian par-boiled rice in the international market are competitive even with the levy of a 20% duty. 
• When the global rice market is bullish, it will absorb volume in high prices too. 
• The government should look at classifying rice as common rice and speciality rice for export policy decisions rather than classifying them as Basmati and non-Basmati. 
• As many as 12 varieties of rice have Geographical Indication (GI) recognition and these should be insulated from general market interventions.