NEW DELHI: Prices for basmati rice have shot up from earlier lows, indicating that traders and exporters are willing to buy from farmers at higher prices on calculations of better price recovery through exports.
This could strengthen the case for hiking the minimum export price (MEP) for basmati from the current $900/tonne to $950-1000/tonne to discourage exports of cheaper variety of rice masked as basmati.
The rice production is expected to drop sharply in the current kharif season because of the poor monsoon. The government is keen to ensure that export of non-basmati rice does not happen to keep local supplies up.
Recently, the government had allowed a 12.5% commission in the MEP calculation. This has effectively reduced the actual MEP from $900/tonne to a lower $788/tonne, thus allowing cheaper varieties of rice labelled as basmati to be exported by traders.
Price of traditional basmati has moved up to Rs 31,000 per tonne (paddy) while the price for the evolved Pusa 1121 variety has also gone up to Rs 22,000 per tonne (paddy).
A government official said “The quotes for MMTC’s import tender for non-basmati varieties were between $379 and $550/tonne. That is an average $450/tonne. If non-basmati rice can fetch that price in the world market today, it stands to reason that basmati rice, which is premium quality, should fetch at least twice or more that amount in exports. Only then will exporters be able to import twice the amount of non basmati for domestic markets on every tonne of basmati exported.”
Last year, basmati exports totalled two million tonnes and fetched the country $2b billion in foreign exchange. This year, the All India Rice Exporters’ Association (AIREA) has projected exports of 2.8 million tonnes, one third of which will constitute the popular Pusa 1121 basmati variety.
The government had reduced the basmati MEP some weeks ago, even before the new rice came into the market in October, from an earlier $1100/tonne to $900/tonne. It’s decision at the time, when drought impact assessments were just rolling in countrywide, was criticised by agri scientists such as Dr M S Swaminathan who maintained that no relaxation in rice exports should be done until after the government assessed the additional offtake from welfare programmes on account of the drought.
Source : The Economic Times