The case for blended basmati

Export of pure/ desi basmati (prince of aromatic rice) Indian rice is well accepted in EU, US, Saudi Arabia, and West Asia. In addition, there is a growing export business of hybrid basmati -- blending cheaper variants with or without the knowledge of the buyer.

The buyer benefits from lower prices, while the seller reaps in higher profits. The trend, under wraps, was prevalent even in the past -- but now it is more or less an established practice due to Iranian and other buyers willing to accept blended basmati, contractually or by informal consent.

Average annual export of basmati in 1990-00 was less than 1 million tonnes (mt) ($1billion or less); and this has progressively increased to about 3 mt ($3billion) in 2012-13 with hybrid varieties and blending strategies.

Indian rules permit 20 per cent of mixture of other rice grains for “basmati” quality certification; Thai Hom Mali (fragrant or Jasmine) provides for 8 per cent of other rice grains. Pakistan generally follows the Indian practice.

BLENDING PRACTICES

The simple form of blend could be a combination of traditional basmati (Dehradooni or Tararoi/Karnal), which is about $1,700/tonne fob and Pusa basmati rice (evolved varieties) at around $1,480/tonne fob. Pusa derivatives are developed by IARI ( Indian Agriculture Research Institute, called “Pusa Institute” at New Delhi) with special strains for high yield, low water consumption and shorter duration, but may lack the aroma of the original gene.

Pusa’s most popular product is the 1121 basmati strain, first commercially exploited by “India Gate brand” since 2005 and is now extensively marketed in India and abroad. It has more than 8mm grain length, is cheaper, and is deficient in aromatic features; but it has four times more yield than traditional basmati and cannot be readily distinguished when mingled with pure basmati. Shipments are invoiced as “Indian 1121 basmati rice”.

Hence, technology has ensured almost unchanged cost of basmati paddy for last ten years, despite the steep rise in water, power labour, fertiliser prices and land rentals. (The market price of paddy may vary according to supply-demand intensity)

The next stage of blending could be of pure basmati (around $1700/tonne fob) or Pusa basmati ($1480/tonne fob) with non-basmati rice (NBR) where grain length is around 6 mm, at one third the value of traditional or Pusa basmati. For example, 1121 basmati rice is about $1500 in a 10 kg package landed for Iran; with a 50:50 ratio of 1121 and NBR.

If the ratio of constituents is not revealed, a seller can seal the deal at anywhere between $1,250 and $1,300/tonne landed Iran — a whopping margin of 25-30 per cent. Should the buyer contractually consent for 50:50 amalgamation then the product is contracted as “Indian 1121 rice” with 50 per cent purity.

The word "basmati" is omitted for obvious reasons from the specifications. The buyer’s cost is minimised and its disposal in Iran becomes highly remunerative, while the seller laughs all the way to the bank by marginally adjusting the mix. With surplus margins, sellers offset risk for delayed payments from Iran.

Pusa Basmati 1121 is now being superseded by Pusa 1509, through advanced hybridisation research at IARI.

The latter will have maturity period of 120 days, as compared to 145 days, lesser water usage and higher yield of 6 tonnes/ha as against 4-4.5tonnes/ha of 1121 and 1 tonnes/ha of pure basmati.

Eleven basmati varieties have so far been notified under Seed Act of 1966 which can be mixed. Both 1121 and 1509 are being sown in Punjab and Haryana.

DIFFERENT APPROACHES

The continuation of creative destruction and evolution of more diversity, along with cost consciousness, is sure to marginalise supply and demand of pure basmati.

There are now two schools of thought in the basmati sector — traditional and modern/contemporary. The traditional sector has players with national and international brand names; swear by pure basmati and get premium for their brand and quality.

Tilda, India Gate, Dawat, Kohinoor, Lal Mahal, Best Food and some others are prominent names in this segment.

Contemporary players are the new millers who are processing paddy of basmati and non-basmati, and have turned exporters by aggressively pricing blends.

Traditionalists regret that basmati name, brands, value are being compromised by such exporters.

Modernites believe that the customer has the right to choose. If a buyer is willing to accept a mixture of basmati and non-basmati, why not offer the same?

Branded parties voice their concern over lower value realisation of an excellent commodity, while the opposite view is that NBR gets a value addition of almost $500/tonne by blending with basmati.

Basmati may be a cuisine for Emperors and Sheikhs in the past—but now common man is King.

Indian annual production of rice is about 100 mt — of which basmati is 8 mt. Surpluses are much greater in NBR than basmati.

The economic principle of export is that surpluses that are larger should be assertively exported.

The ethical side of business demands that the customer must agree to the blending that he is expected to receive. Otherwise such a transaction may be deemed deceitful and fraudulent.

(The author is a grains trade analyst.)