India has decided to significantly cut its floor price of $1,200 per metric ton for basmati rice exports after a chorus of complaints from millers and traders concerning a sharp decline in the overseas sales of this premium aromatic grain.
India is the biggest rice exporter globally and one of only two countries to export the basmati variety. India, in particular, exports around 4 million tons of basmati rice to various countries, including Iran, Iraq, Yemen, Saudi Arabia, the United Arab Emirates, and the United States.
But India took the international market off-guard by banning non-basmati rice exports last month amid a major rise in domestic prices and rain damage. Soon after, it also imposed a 20 percent duty on parboiled rice and a hefty $1,200 metric ton flour price for basmati rice after traders started to classify non-basmati rice as basmati to dodge restrictions
The decision comes a week after media reported that India is likely to achieve its rice production target of 111 million tons during the Kharif season as cultivated area stood higher than the five-year average and monsoon’s late arrivals helped boost yields.
“The decision to lower the basmati MEP would help farmers who were suffering losses due to declining exports,” said Prem Garg, the president of the Indian Rice Exporters Federation talking to Reuters.
He further emphasized that the move would serve to maintain India’s standing in the global basmati rice market and he also noted significant surplus would have put downward pressure on prices, adversely affecting both farmers and India’s rice sector. Thus, the decision to lower the MEP will be instrumental in averting such a scenario.
Given that basmati rice is not a staple in India and with the arrival of the new season’s crop scheduled for next month, there was a looming concern of an oversupply of this superior-grade rice.
The moves are in response to millers and traders complaining of a decline in sales as buyers turned to Pakistan, the only other exporter of this prestigious aromatic variety with an MEP of $1,103 per metric ton for Super Basmati White.
Though Pakistan is also forecasted to have a high production of 9 million tons with exports predicted to hit $3 billion first time ever, international prices are their highest in over a decade amid supply concerns from other regions.
It also must be noted that India has been undercutting Pakistani rice for years as local industry grapples with the high cost of production due to prices of key agriculture inputs and fuel hitting record highs.