India Likely To Export More Rice in The Current Year, Says CRISIL.

Indian rice millers with established overseas buyers and prudent working capital management practices can expect a windfall rice season at hand

The next 12 months augur well for India’s rice millers. Expectation of a bumper rice crop in India in the October 2011-September 2012 season, lifting of the ban on non-basmati rice exports and a weak production outlook for most rice-exporting countries may drive a sharp increase in India’s share in global rice trade. This is based on a CRISIL study of rice millers and exporters in the country. Depreciation in the value of the Indian rupee against the US dollar since September 2011 may also benefit rice exporters, as it makes India’s rice more competitive globally.

CRISIL expects the profitability of India’s rice millers to increase by 150 basis points. This depends on the proportion of exports in overall sales. However, given the working capital intensity of the rice industry, improvement in the millers’ business volumes may be restricted to the millers that have direct contacts with overseas buyers. Therefore, Indian rice millers with established overseas buyers and prudentworking capital management practices can expect a windfall rice season at hand. The expected decline in rice production in leading rice exporting nations such as Thailand, Vietnam and Pakistan may also favour India’sexporters.

According to Mohit Makhija, senior manager, CRISIL Ratings, “Healthy export opportunities, low paddy prices and a favourable exchange rate will lead to improved profitability for rice millers in 2011-12. A CRISIL study on 170 rated rice millers indicates that higher rice exports will lead to improved profitability. While paddy prices in the current season are 25% lower than those of the previous year, the prices of milled rice are unlikely to reduce by the same proportion, given the low supplies from the leading rice-exporting nations.”

CRISIL believes that India’s share in the rice export market may triple to 21% in 2011-12 from 7% in 2010-11. The benevolent monsoon across rice cultivating states is expected to help India’s rice production reach100 million tonnes in 2011-12, up 6% over the previous year. According to Gurpreet Chhatwal, director, CRISIL Ratings, “We expect India’s rice exports to reach around 7 million tonnes in 2011-12, up from 2.2 million tonnes in 2010-11. The government’s decision to lift the ban on export of non-basmati rice in September 2011 could not have come at a more opportune time. The lifting of the ban may translate into additional $2 billion in export revenue for India’s rice millers andexporters in 2011-12.”

The rice surplus state of Punjab is likely to be an important player in rice exports. Incentives to non-basmati rice export by the state government has led to heavy paddy buying by private millers in the current buying season, with their crop purchase touching more than double of what they bought in the last season. Purchase by private millers so far have reached 3.63 lakh tonne in Kharif Marketing season 2011-12 against 1.91 lakh tonne lifted in the entire season last year, as per Food Corporation of India (FCI) data. Total paddy procurement in Punjab so far stood at 103.35 lakh tonne, with government agencies buying 96.5% of total arrival. Traders attributed the sudden jump in private purchase of paddy to sops given by the state government last month to boost non-basmati rice export from Punjab. Aiming to export 10 lakh tonne of non-basmati rice, Punjab allowed levy free private buying of non-basmati paddy to boost rice export.

Andhra Pradesh, also a rice surplus state, has an export target of 20 lakh tonnes of rice in the current season from Kakinada port.

While private rice millers are expected to do well, the government is not a spectator. The government has allowed the export of 10,000 tonnes of non-basmati rice to three African nations—Kenya, Somalia and Djibouti—through state-run FCI at economical rates. “Export of 10,000 tonnes of non-basmati rice to Horn of Africa (Kenya, Somalia & Djibouti) from the central pool stock of FCI at an economic cost has been permitted,” the Directorate General of Foreign Trade (DGFT) has said in a notification. The rice will be exported to these nations at an economical cost of Rs20,689.50 per tonne.

Source : moneylife.in