NEW DELHI: Chances of an empowered group of ministers (EGoM) cutting basmati export floor price (MEP) to $750-800/tonne from the current $1100/tonne seem slim now against projections of a 10% drop in rice production this kharif and a 60-lakh hectare drop in paddy acreage.
On the back of a near-drought countrywide, foodgrain (wheat and rice) stocks
of over 50 million tonnes with the government, though twice the storage space with the FCI, are expected to come under pressure this year. A marked slash down of MEP is likely to indirectly ease exports of high-value non-basmati rice and could tighten domestic supply and boost rice prices, already on the upswing, further. And the government is loath to allow food prices to soar in the crucial festival season starting this month.
Of the Centre’s stocks, rice alone total around 187 lakh tonnes while wheat stocks are around 360 lakh tonnes, the latter including purchases of a record 25.29 million tons this year. Despite that, wheat prices in the spot market have already risen to Rs 175/qtl compared to Rs 1110/qtl a month back, on apprehensions of a possible supply shortfall. (The poor summer monsoons are expected to impact on Rabi wheat output as well).
On Tuesday, flour millers associations urged the government to quickly release wheat from its reserves into the local market to check rising prices on concerns over weak monsoon rains and firming festival season demand. They contended that wheat supply with them has virtually run out since they bought very little after the government set a high procurement price of Rs 1080/qtl from farmers. Trade analysts, however, point to hoarding ahead of the peak September-October festival season as a key reason for the spurt in prices.
On July 24, the FAO forecast a total world trade in rice of 31 million tonnes , four million tonnes of which would be from India (including basmati). However, trade analysts contend that in the existing monsoon scenario, any move to cut the MEP any further for rice would be “imprudent and premature”, impacting adversely on domestic supply and influencing consumer prices.
“The current monsoon situation in India does not seem to be allowing for any non basmati export till the situation on actual paddy output is clearer at the end of the season, in September 2009. Under these circumstances, India’s contribution to world trade is likely to be no more than 2.5 million tonnes compared t the projected four million tonnes,” said a foodgrain analyst. India exported about 1.5 million tons of basmati rice during the financial year that ended March 31, mainly to the Middle East, Europe and the US.
Source : The Economic Times