NEW DELHI: Recession-struck Saudi Arabia has withdrawn import subsidy on basmati rice in response to India’s low minimum export price.
Together with the significant hike in import tax on basmati rice by Iran some weeks ago, the move could hit India’s exports of the premium variety rice. This will in turn make it difficult for exporters to import two tonnes of non-basmati rice at zero duty for every tonne of basmati exported, as the government expects.
Saudi Arabia, India’s biggest buyer of traditional basmati, is feeling the pinch of the financial crisis. The country is set to withdraw the import subsidy of $267 per tonne from November 29 on the contention that mainly exporters benefited from it.
The decision became easy after the Indian government recently decided not to hike the effective minimum export price for the rice from the existing $788 per tonne.
A directive by the Saudi consumer affairs department to the country’s importers has also made it mandatory for them to not hike consumer prices from last year’s level of $1350 per tonne, at least for six months. Therefore, Indian exporters may have to sell rice at $1100 per tonne to Riyadh for importers to retain their commission.
Exporters say this is far below the $1800 per tonne for high-quality basmati and $1400 per tonne for a mix with Pusa basmati they can sell based on their purchase price of Rs 37,000 per tonne and Rs 18,000 per tonne, respectively, for the two varieties of rice.
The open market price of rice could go up further because of the exporters’ inability to export basmati rice and import non-basmati rice against the exports.
Source : The Economic Times