Non-basmati rice exports likely to get affected in the near to medium-term due to hike in minimum support price (MSP) by 13 per cent for 2018-19 for the common variety of paddy, according to a report.
Non-Basmati rice MSP was hiked by 13 percent for 2018-19, for the common variety of paddy against the range bound 3.5-5.4 per cent in the past, Icra said in a report.
Also, the hike in import duty by Bangladesh, a major consumer of non-Basmati rice from 2 percent to 28 percent, from June 2018, may result in a decline in exports in the overall non-Basmati rice segment, Icra said in a report.
Besides, Thailand is expected to increase its market share by increasing its supplies in the global market.
These factors can further impact the operating margins of non-Basmati players, which are already thin because of the limited value-additive nature of the business.
"The recent developments in the non-Basmati rice segment in the domestic as well as the global markets are not encouraging for the Indian rice millers, since the MSP hike has been significant this year, against a range bound hike in the past," Icra Ratings vice president Manish Ballabh said.
He said, the increase in the MSP could result in an increase in the acreage for sowing, thus ensuring higher availability of rice for exports, on the other hand the sharp increase would increase the prices, thereby making Indian rice costlier in the global markets, which could impact non-Basmati rice exports.
"Moreover, with the imposition of the higher import duty of 28 percent, exports to Bangladesh are likely to decline. Given that the country was the key market for India's non-Basmati rice and accounted for 21 percent of the total non-Basmati rice exports in value terms in 2017-18, this move will further affect the credit profile of the Indian non-Basmati rice millers," he added.
India is one of the largest exporters of non-Basmati rice and in 2017-18, the country exported 8.63 million tonne of non-Basmati rice, which was more than double the quantity of Basmati rice exports of 4.05 million tonne.
On the positive side, the MSP price hike and the import duty imposed by Bangladesh may be somewhat offset by China's interest in India's non-Basmati rice, which has registered a few Indian Rice milling units, following the inclusion of non-Basmati rice in the 2006 Protocol on export of rice from India, Icra said.
Compliance with phytosanitary norms can make China a major export destination for Indian non-Basmati rice millers, it added.
"An improvement in the situation is expected only if there is a substantial demand from China or reduction of import duty by Bangladesh. Moreover, Thailand being a key competitor, the rupee- baht movement would be a determinant of the export competitiveness of the Indian players," Ballabh added.
Source: moneycontrol.com