During October 2011-September 2012, India, for the first time, positioned itself as the largest exporter of rice, by shipping out 10 million tonnes — from private stocks and by private parties. India went ahead of the world’s major exporting nations — Thailand, Vietnam and Pakistan — numerically and qualitatively.
The export performance this time is marked by some special features — not only were Indian prices competitive and Thailand’s recent policies regressive, but perhaps most significantly, old market players were gradually being replaced by new ones. Indian exporters were spreading their wings to replace old players represented by MNCs.
THE PAST (1980-2008)
Historically, Indian basmati rice (fragrant or aromatic variety) export started in 1980-90s when substantial quantities were sent to the erstwhile Soviet Union and the Gulf countries.
The cereal was sourced from Punjab, Haryana and Uttar Pradesh, including the current region of Uttarakhand. Trade with Soviet Union served the purpose of balancing the bilateral trade with India.
Between 1990 and 2008, the country’s rice production increased from 73 million tonnes to 95 million tonnes. Almost 90 per cent of the output is non-basmati rice. Export of basmati and non-basmati rice ranged between 2 million tonnes and 5 million tonnes per annum. Non-basmati was procured both from private and FCI stocks.
For basmati rice, Indian millers and traders like Kohinoor, KRBL, Amira, Shivnath, LT Overseas, Navbharat, BSRK and many others catered directly to Gulf countries, including the most coveted buyers in Saudi Arabia, in break bulk and container shipments.
However, Indian exporters lacked financial muscle, access to the overseas market of non-basmati rice and the ability to sell on C&F basis/charter vessels.
Therefore, business between 1900 and 2005 was done through traders or MNCs based in New York, Geneva, Singapore and Bangkok. Some of these traders are Continental Grains, Glencore, G. Premjee, Louis Dreyfus, Ascot, Cargill, Novel Commodities, ORCO, Agrocorp, Noble Grains, Olam, Concordia, Phoneix Commodities and others, who bought break-bulk (bagged ship loads) cargoes on FOB basis for the Far East (Indonesia, Malaysia, Philippines), South Asia (Bangladesh, Sri Lanka) and Africa (Senegal, Ivory coast, Guinea, Mali, Benin, Tanzania, Kenya, Congo, Comoros, Madagascar, Mauritius and others).
These intermediaries sourced the then popular varieties PR106 and IR64 (long grain) and Pant 4 (P4) of 25 per cent or 100 per cent broken grains, added their margins, freight and carrying costs, before selling to the local trade abroad.
They successfully pitched India against Vietnam, Myanmar, and Pakistan for price advantage, squeezed profitability of Indian shippers and hammered down dollar realisation.
Nigeria and South Africa are premium markets for 5 per cent broken parboiled rice that was serviced by private traders like Kohinoor, Emmsons, Shivnath and millers based in Kakinada (AP).
The clout of miller-exporters of Andhra Pradesh like Sri Ramalingeshwara and Sri Lalitha, who set up modern sortexing facilities for parboiled rice in early 2000 and benefit from adjacent port facilities, has been steadily increasing for top-end specifications. Export from Kakinada is mainly of IR64 and 1001 gene. Kolkata-based traders serviced Bangladesh via land and sea route, some of the prominent names being R. Piayre Lal, LMJ, VK Udyog, PKS Exports for 15-16 per cent parboiled rice.
THE PRESENT (2011 ONWARDS)
The leanest period of activity was February 2008 to September 2011, when the Government imposed a prohibition on non-basmati rice export. After resumption of exports in September 2011, there has been a huge change. Some of the MNCs of the 1990s, named above, had either ceased to exist long ago or were replaced by new entities.
Some others retained a passive market presence. Meanwhile, Indian private exporters have been trading proactively. Russia or CIS countries are virtually absent as buyers.
Exporters of Delhi, Kakinada, Mumbai, Kolkata and millers in Punjab, Haryana, Uttar Pradesh are vigorously sourcing/bulking well milled rice from the States of Chhattisgarh, Andhra Pradesh, West Bengal, Bihar and Orissa, economising on domestic freight and taking export positions by chartering vessels to destinations in Asia and Africa.
They obtain liberal financial assistance from banks or from central PSUs. This has stabilised paddy prices and kept the millers of the eastern region in business.
The participation of MNCs and international traders has been considerably marginalised. This strategy provides better price realisation and direct contact with end-buyers. The current assertiveness has diminished the share of Pakistan and Vietnam in African and Middle -Eastern markets.
However Vietnam continues to enjoy pre-eminence in the Far Eastern region, with China, Philippines, Indonesia and Malaysia preferring the produce of the ASEAN region.
India still remains an alternate option for them. Indonesian buying agency BULOG is not at ease with doing repeat business, as some shippers have failed to meet contracted delivery deadlines.
The challenge before the rice trade is to meet the expectations of Far Eastern nations, including China, for non-basmati. (China now buys Indian basmati and Pakistani non-basmati.) China emerged as the second largest importer of rice last year and procured most of its supplies from Vietnam, Pakistan and Myanmar.
India remained a non-entity for China due to political reasons. Pakistan made full use of its political proximity and exported close to 800,000 tonnes. A diplomatic initiative is required for India’s entry in the non-basmati segment of China.
African and West Asian countries are favourably inclined to deal with Indian counterparties like KRBL, Ramalingeshwara, Lalitha Export, Sarla Foods, Emmsons, LT Overseas, Amira, Shivnath, Best Foods, to name a few, and treat them at par with MNCs.
The reason -- local traders can exercise better control on local procurement by aggregating smaller lots competitively and have expertise in dealing with shipping companies and vessel owners. Domestic outfits of MNCs are not able to do the same, despite financial liquidity. African markets (except Nigeria and South Africa) are highly price-sensitive.
The export of 25 per cent broken variety, elimination of third party, and freight advantage vis-a-vis Far Eastern origins, amounts to lower overall cost for Africa.
The grip of Kolkata based parties in Bangladesh continues to be firm. Indian traders have also commenced “stock and sale” operation in Bangladesh and Africa through their local companies or associates — an activity that was absent in the past. 1121 basmati, which is cheaper than traditional basmati by 40-50 per cent, has caught the fancy of Gulf countries, especially Iran, which was earlier seeking fragrant varieties from Thailand. PR106 gene is replaced by PR11 or other modified classes. IR64 and IR8 types, which are cheaper than PR, are treated at par with long grain rice.
Kandla port was the hub in 1990-2007, while the current activity for non-basmati rice is more focused on Kakinada port, which, however, is heavily congested.
With repeat shipments between sellers and buyers, it is easier to settle claims or counterclaims of shortages or demurrage/dispatches. Quality-related claims have declined with better milling and latest sortexing technology.
Policymakers need to keep the trade free, without intervention of outdated ideas of quantitative restrictions, minimum export price, release orders or canalisation. The Indian success story in rice export can be emulated with respect to other commodities.
(Narang is a commodity analyst. Singh is rice trader in Emmsons International Ltd, New Delhi.)