The Centre’s decision to discourage rice exports by banning broken rice shipments and imposing a 20 per cent export duty on non-basmati rice varieties has drawn flak both from local trade and global commentators. Traders worry that the 20 per cent export levy will dent the emerging global market for non-basmati varieties such as Sona Masoori consumed by the Indian diaspora. There are questions about who will foot the tax bill on the 1 million tonnes of rice said to be sitting in the Indian ports awaiting shipment. Global commentators have expressed fears that export curbs from the world’s largest rice exporter will add to global food shortages and stoke inflation, hitting poor nations hard. But India’s decision to impose selective export curbs appears to be motivated by the justifiable need to ensure sufficient stocks of the staple for domestic consumption, while warding off the threat of a price spiral.
A delayed and patchy South-West monsoon is expected to diminish the size of India’s rice production by about 10 million tonnes this year, out of an expected kharif output of 111 million tonnes. Kharif accounts for 80 per cent of the annual paddy output. Domestic buffer stocks of foodgrain, which feed the Public Distribution System were at just 60.11 million tonnes by September, a good 34 per cent below levels last year. The low stocks are mainly on account of Central agencies failing to meet their wheat procurement targets in the recent rabi marketing season thanks to short supplies and spiralling local prices. A similar script is now threatening to play out with rice as well, with a poor crop and export demand fuelling shortages. The low buffer stocks cast doubts over the Centre’s ability to continue with its distribution of free foodgrains under the PM Garib Kalyan Anna Yojana beyond this month; the scheme has been providing an additional 5 kg of rice and wheat free to targeted poor households since Covid. Should PMGKAY be discontinued, its 81.3 crore beneficiaries may turn to the open market for their additional cereal requirements, making it necessary for the Centre to keep prices affordable at a time when food inflation is again rearing its head. While placing export curbs, the Centre has taken care to be selective. The export ban applies only to broken rice exports which made up 3.9 million tonnes of the 21 million tonne exports in FY22, and mainly go towards animal feed in countries such as China and Vietnam. Both par-boiled and basmati rice exports, accounting for over 10 million tonnes and intended for human consumption, have been kept out of the ban. On non-basmati rice, the export tax of 20 per cent ensures that the cereal is not shipped out at unremunerative prices. This year, non-basmati rice from India has been exported at FOB prices that are at a discount to that of exporters from other countries, with realisations not even matching the domestic Minimum Support Price for paddy.
Overall, a cautious policy that conserves domestic stocks of foodgrains in a populous country like India is definitely prudent at a time when global agri markets are rife with fears of a global food crisis precipitated by fertiliser shortages and droughts. The criticism that such export bans should not be ad-hoc and must be intimated in advance allowing time for trade and global markets to prepare, is a valid one. The government needs to pay heed to this.