The Case For Uniform Minimum Export Price For Rice, Without Basmati Distinction

Relevance: GS3 - Major crops-cropping patterns in various parts of the country, - different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; issues of buffer stocks and food security;

(Source: The Hindu, Indian Express, 08/27/2023)

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Why in the news?

• Recently, the Government of India prohibited the export of Basmati rice valued at less than $1,200 per metric tonne (MT).
• The Agricultural & Processed Food Products Export Development Authority (APEDA), which is the agency responsible for the regulation of the export of Basmati rice, has been directed to set up a committee to examine the variation in prices.
• According to the Union government, there has been a large variation in the contract price of exported Basmati with the lowest contract price being $359 per MT as compared to an average export price of $ 1214 per MT in August 2023.

What has the government directed regarding Basmati exports?

• Ban: Exports of Basmati rice valued below $1200 per metric tonne have been prohibited.
• Directions to APEDA: The Agricultural & Processed Food Products Export Development Authority (APEDA) has been directed to only allow the registration of rice below the value of $1200/ tonne for the issue of Registration-cum-Allocation Certificates (RCAC).
  • Contracts below $1200 per tonne are to be paused.
  • A committee is to be set up by the Chairperson, APEDA, to examine contracts below $1200 per tonne in order to understand price variations and the use of this route for exports and submit its report within one month.
  • APEDA must hold consultations with traders to sensitize them and discourage the export of non-Basmati white rice.
• A 20% duty was introduced on all parboiled non-basmati rice exports

Other supply-side actions taken by the government

• In May 2022, the government imposed a ban on wheat exports.
• In September 2022, the Centre banned exports of broken rice and levied a 20% duty on all white (non-parboiled) non-basmati grain shipments.
• In June 2023, stock limits were imposed.
  • Wholesale traders and large retailers were not permitted to hold more than 3,000 tonnes at a time, small stores (10 tonnes) and 75% of the annual installed capacity for wheat millers
• In July 2023, exports of white non-basmati rice were banned altogether — only parboiled non-basmati and basmati exports were allowed.
• In August 2023, the Centre imposed a 20% export duty on par-boiled non-basmati rice.

Why has the Government banned exports of basmati?

• Prevent illegal shipments: The government has banned the export of basmati rice to prevent the illegal export of non-basmati white rice.
  • Non-basmati white rice is being exported under the HS codes of basmati rice and par-boiled rice.
  • The government banned the export of non-basmati white rice in July 2023 due to the rising domestic prices of rice.
• Control retail price: The move will increase domestic availability of rice which will lead to lower prices in the local market.
  • The retail prices of rice have increased by 11.5% over the last year (July 2022-2023).
  • As per the official consumer price index, retail food inflation averaged 11.5% year-on-year in July with the average all-India modal retail price of rice increasing from ₹32 per kg to ₹40 per kg in the same period.
• Improve Availability: Although the estimates provided by the Ministry of Agriculture indicate that the production of rice and wheat has reached record highs this year, the rise in prices counters this argument.
  • In case output was higher and government procurement in 2021-22 and 2022-23 lower than that of 2020-21, more grain would have been available in the open market to drive down prices.
  • However, this has not been the case and the government has been forced to restrict exports to improve domestic availability.

Indian Rice Exports

• India is the world's leading rice exporter, accounting for more than 40% of the global rice trade, as well as the second-largest producer after China.
• In 2022-23, India exported around 45.6 lakh tonnes of basmati rice valued at $4.8 billion.
• Major importers of Indian basmati are Iran, Iraq, Yemen, Saudi Arabia, the United Arab Emirates, and the United States.
• According to data from the Union Ministry of Agriculture, the price of rice rose from 124.37 million tonnes (mt) in 2020-21 to 129.47 mt in 2021-22 and 135.54 mt in 2022-23
  • Wheat fell from 109.59 mt to 107.74 mt before rising to 112.74 mt in 2022-23.

Criticism

• According to traders, most basmati exports are at $1,050-1,100 per tonne for the parboiled Pusa-1121 variety and $950-1,000 for parboiled Pusa-1509 basmati rice.
• The $1,200 Minimum Export Price (MEP) is claimed to be too high as only steamed Pusa-1121 and 1718 rice ($1,200-1,300) and traditional premium basmati ($1,550), which together make up just 15% of total basmati exports, fetch such prices.

Suggestion

• A uniform MEP of $800-900 per tonne for all rice, whether basmati or parboiled, and even white non-basmati has been suggested by traders.
• Develop the export markets for varieties such as Gobindobhog (West Bengal), Kalanamak (Terai region), Chak-hao (Manipur), Red Matta (Kerala), and Ponni (Tamil Nadu).
• The uniform MEP would foster exports of these high-value varieties without compromising domestic food security.
• It would also insulate the cultivators of other premium varieties that are not presently sold through the PDS from trade policy vagaries.

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FAQs

MCQs

Question: According to India’s National Policy on Biofuels, which of the following can be used as raw materials for the production of biofuels? (UPSC CSE 2020)

1. Cassava
2. Damaged wheat grains
3. Groundnut seeds
4. Horse gram
5. Rotten potatoes
6. Sugar beet

Select the correct answer using the code given below:

(a) 1, 2, 5 and 6 only

(b) 1, 3, 4 and 6 only

(c) 2, 3, 4 and 5 only

(d) 1, 2, 3, 4, 5 and 6

Question: Which of the following factors/policies affected the price of rice in India in the recent past?

1. Minimum Support Price
2. Government’s trading
3. Government’s stockpiling
4. Consumer subsidies

Select the correct answer using the code given below: (UPSC CSE 2020)

(a) 1, 2 and 4 only

(b) 1, 3 and 4 only

(c) 2 and 3 only

(d) 1, 2, 3 and 4