India bans broken rice export as production seen to fall by 11%

India on Thursday issued a notification prohibiting export of broken rice (under HS code 1006 40 00) amid fear of a lower output of the paddy crop as delayed monsoon and low rainfall in some States brought down the acreage. The ban will also improve domestic availability of the rice variety since its export has gone up exponentially this year.

The Directorate General of Foreign Trade on September 08 notified the prohibition with effect from September 09 and said that “transitional arrangement shall not be applicable under this notification for export of broken rice under HS code 1006 40 00.”

The DGFT also said the consignments of broken rice will be allowed to be exported between September 09 and September 15 if loading on the ship has commenced before the notification, or where the shipping bill is filed and vessels have already berthed or arrived and anchored in Indian ports and their rotation number has been allocated.

Also, where broken rice consignment has been handed over to the Customs before September 08 notification and is registered in their system can be allowed for export.

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Addressing media on Friday, Food Secretary Sudhanshu Pandey said the export of broken rice has gone up to 21.31 lakh tonnes (lt) during April-August of current fiscal against 15.8 lt in the year-ago period and was as low as 0.51 lt in April-August of 2019. Asked about what constitutes broken rice, Pandey said it is as per HS code definition.

Definition of broken rice

According to European Commission, ‘broken rice’ is damaged white rice, broken during processing.

“During the milling process, grain fragments, the length of which does not exceed three quarters (75 per cent) of the average length of the whole grain, are separated from the white rice, whose shape remains intact. This is classed as broken rice,” the Commission said.

Export of broken rice during April-August period

The Food Secretary also said that due to the lower acreage of paddy, the rice production in current kharif season may drop by 10-12 million tonnes (mt) from 111.76 mt year-ago.

“It is just a statistical assessment based on lower acreage and the Agriculture Ministry will release the output estimate,” Pandey said. He pointed out that the paddy acreage is down by 38 lakh hectares from a year-ago period.

Impact on global rice trade

“India, which is the offshore rice granary for international market with 42 per cent share in global rice trade, has consciously regulated and reacted with human touch,” said trade analyst S Chandrasekaran.

The decision impacts only 20 per cent of global rice supply, he said adding: “It seems China factor has significantly played on the decision on broken rice exports.”

However, the export duty on few segments are not just due to shortfall of acreage or drought and inflation but lack of transparency of the global rice stocks, too, he said and added that a common thread between the decisions on broken rice and raw rice is visible.

On the export duty of 20 per cent on non-basmati rice (excluding parboiled), which also comes into force on September 9, Pandey clarified that it will be applicable on the already contracted quantity, which is a normal trade practice.

Implementation strategy

Experts, however, pointed out that the implementation strategy of this policy is critical since the government has not fixed any minimum export duty it has to be calculated on the basis of Letter of Credit (LC) in which under-invoicing cannot be ruled out.

“It is not clear why the MEP on non-basmati rice has not been announced when the government is aware of the issue and a tariff plan for edible oil import is in operation for last so many years.”

Traders and exporters also said that in the absence of an appropriate definition of broken rice, it is inevitable to allow misinterpretations.

“The formulation of a strategy for price bandwidth and authentic product labelling are pivotal in protecting long-term rice export interests of India. This strategy, however, should strike a balance with domestic requirements. The latest decisions are just a beginning of an evolving events in the domain of rice,” said an exporter.

Presenting a detailed analysis on price and availability of broken rice, the Food Secretary pointed to a scarcity in terms of its availability consequent upon which lifting of rice stock from Food Corporation of India (FCI) for ethanol manufacturing has improved.

Though Pandey asserted that the country will have surplus rice production this year (in comparison to demand), he declined to reply to a question on whether the government would extend the free foodgrains programme under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY).

Ricing prices

According to official data, maize prices increased from ₹19/kg (on January 1, 2022) to ₹24/kg (September 8, 2022) and broken rice increased from ₹16/kg to ₹22/kg during the same period.

This led to increased demand from ethanol manufacturers to source rice from FCI, which has allocated 13.88 lt until August 21 in current fiscal as against only 81,044 tonnes in entire 2021-22. The all India average retail price of rice has gone up by 6.4 per cent to ₹37.5/kg as on September 07 from year-ago level.