The Hindu Business Line : Floor price may replace ban on rice exports

Relief on cards?
Niche varieties such as Sharbati and Swarna Masuri, Ponni and Red Matta may benefit from this move.
At least, 8-9 lakh tonnes of rice, which fetch over Rs $450 a tonne, could be exported.
Still, the floor price may not be without flaws.

Harish Damodaran

New Delhi, Oct. 22 The Commerce Ministry is examining the viability of imposing a minimum export price (MEP) of around $450 a tonne on rice shipments, in place of the current blanket ban on export of all non-basmati rice.

“There is a proposal to have an MEP that is pegged high enough, so as to allow export of premium rice varieties that are not categorised as basmati. In fact, some of these varieties, such as Pusa-1121, have been commanding a premium over even traditional basmati rice,” sources told Business Line.

Niche varieties

Prior to the export ban (effective since October 9), Pusa-1121 was fetching $1,350-1,400 a tonne free-on-board (f.o.b), against $1,250-1,300 for traditional basmati (including CSR-30) and $1,150-1,200 for Pusa Basmati-1.

In addition, there are certain niche non-basmati varieties such as Sharbati (which sells at $650-700 a tonne) and Swarna Masuri, Ponni and Red Matta ($550-600).

Artificial Distinction

“None of these varieties are procured for the public distribution system (PDS) and, therefore, banning their exports serves no purpose. So, instead of having an artificial distinction between basmati and non-basmati, it makes more sense to impose an MEP, which will ensure no PDS-compatible rice goes out of the country,” the sources said.

During 2006-07, non-basmati exports totalled 37.05 lakh tonnes (lt), valued at Rs 4,257.88 crore.

Of these, shipments of Ponni and Swarna Masuri were estimated at 1.5-2 lt, with these being 1.5 lt for Sharbati and 15,000 tonnes for Matta, besides the 2-2.5 lt of Pusa-1121.

To this may also be added the three lt-odd of five per cent double-polished, sortexed long-grain rice from Punjab and Haryana, which is exported at well over $400 a tonne to West Asian market.

“In all, we are talking of 8-9 lt of non-basmati rice fetching more than the proposed MEP. The remaining 28-29 lt will fall within the MEP and cannot be exported,” the sources added.

PDS compatible

Much of these comprise shipments from Kakinada port that have been going at $285-300 a tonne and this rice is PDS compatible.

However, even the MEP option may not be without flaws.

There are many exporters, for example, who dispatch both basmati as well as non-basmati shipments, very often to the same buyer.

Tricky situation

“A situation can arise where the buyer can be billed the basmati consignment at a lower-than-normal rate and the non-basmati at just above the MEP. The MEP will, then, have to be pegged sufficiently high at even $500 plus,” the sources said.

But even here, the problem would be mainly vis-À-vis the double-polished long-grain rice shipped to West Asia.

“The US, Europe, Singapore, Australia and Hong Kong do not buy any non-basmati rice from India. 90 per cent of the non-premium par-boiled grades go to Africa. It is only in the balance 10 per cent portion to West Asia, where there is possibility of dubious invoicing taking place,” the sources admitted.