Why the rice trade wants India in the RCEP

At a time when domestic producers of commodities such as dairy and plantation products including coffee, tea, rubber, pepper and arecanut, among others, are wary of the proposed RCEP (Regional Comprehensive Economic Partnership) deal, the Indian rice trade is keen that the cereal is included as part of the agreement as it could help boost exports.

Rice is among the few commodities where India has a competitive advantage in the ongoing RCEP talks. Negotiations are in advanced stages between the ten members of the Association of South East Asian Nations (ASEAN) and countries with whom they (ASEAN members) have an existing free trade agreements such as Australia, New Zealand, Japan, South Korea, China and India, for the proposed RCEP.

The pact is a proposed comprehensive trade agreement that covers goods and services, among others, including investment, economic and technical co-operation and intellectual property rights. India is the second largest producer of rice after China, but is currently the largest exporter of the cereal. Trade sources believe that inclusion of rice as part of the RCEP pact will open up a market as big as 10 million tonnes per year in the ASEAN region, where the Indian players expect to get a fair chance to compete with other major producers such as Thailand and Vietnam. Though India has been the largest exporter of rice, including the basmati, for several years now, its market share in the ASEAN region is negligible (see table).

Indian exporters, mainly of the non-basmati rice variety, sources said, have largely been denied a fair chance to compete in markets such as Malaysia, Philippines, Indonesia and China due to various reasons, including the imposition of both tariff and non-tariff barriers by the consuming countries and their preference to source the cereal from regional producers. For example, in the Philippines, which annually imports about 2 million tonnes of rice, the Indian cereal faces a differential duty structure, which makes it expensive compared to other ASEAN competitors such as Thailand and Vietnam. Indian rice is subjected to a duty of 50 per cent in the Philippines, while the Thai and Vietnamese origin rice attract a duty of 40 per cent. This higher duty makes the Indian rice uncompetitive in the Philippines.

In the case of Malaysia, which has an annual rice import market of 1 million tonnes, the South East Asian nation prefers to buy the cereal from Pakistan over religious affinity. “Though India imports over 3 million tonnes of palm oil and related products from Malaysia, it is unfair that we get a raw deal from that nation when it comes to rice,” sources said. Similarly in Indonesia, the complex tendering process makes it tough for the private Indian players to participate.

China play

With regard to China, the largest buyer of rice among the proposed RCEP members, with an estimated market size of 3 million tonnes, Indian exporters are yet to receive any major orders. Last year, China had certified about 23 rice mills in India, including four non-basmati rice producers.

Meanwhile, China has started selling its old rice stocks in the African market, the stronghold of India, at a lower price.

“We want the Centre to insist on including rice as part of the RCEP deal as there is a possibility that attempts are likely to be made by ASEAN members to exclude it, knowing fully well that it is advantageous to us,” a source said.

Also, countries such as Japan and South Korea present an opportunity for Indian exporters to explore. Japan is currently importing all its rice requirements from the United States, while South Korea has a duty of 513 per cent on rice imports.

Besides helping consolidate its position in the global rice trade, the opening up of the RCEP market could help rake in more foreign exchange and also trim the bulging stocks in the Central pool, sources said. Unlike the African nations, which form the largest market for Indian rice exports, the export realisations could be higher in the ASEAN/RCEP bloc.

India’s rice production is on the rise and touched a new high of 116.42 million tonnes in 2018-19. With surplus rains aiding planting this year, output is likely to go up further. Moreover, the rice stocks in the Central pool are at a record high of 24.91 million tonnes as on October 1, ahead of the start of the procurement season.

According to the International Grains Council, rice production in India is projected to be 115.5 million tonnes for the 2019-20 October-September marketing year and consumption at 102.2 million tonnes. With an opening stock of 27.4 million tonnes, the total rice availability is projected at 142.9million tonnes. IGC has projected Indian rice exports for 2019-20 at 11.7 million tonnes.