The Hindu Business Line : Strategies to avoid rice imports

Rice yields in India are abysmally low; and there are wide regional variations. Unless there is proper planning and execution of projects to raise production, rice is set to go the wheat way — from surplus and exports to shortage and imports, argues G. Chandrashekhar.

It is by now common knowledge that all is not well with the Indian foodgrains sector. While demand has been increasing robustly as a result of rising incomes and population pressure, low yields and stagnating output have resulted in tight availability, firm prices and fall in per capita usage.

Recent developments in rice, the country’s largest food-crop, are a cause for serious concern. Indian rice is inexorably going the wheat way, available indicators suggest. Acreage has stagnated, output has turned flat and yields continue to be low, with wide regional variations. Concerned over rising prices, New Delhi has banned futures trading in rice. Export of non-basmati rice has been restricted, with the imposition of a high minimum export price. Storage limits may be imposed too. Yet, for consumers, there is little relief from high prices.

Overseas demand

India has been a regular exporter of both basmati and non-basmati varieties of rice for over 20 years now. Basmati, the country’s long-grain fragrant rice has always enjoyed excellent demand in overseas markets. Basmati rice exports are about 10-11 lakh tonnes a year, valued at about Rs 3,000 crore. Rice prices (non-basmati varieties) seldom attracted consumer ire, unlike other grains.

One possible explanation for this is the sale of rice by State governments (mainly in South India) at subsidised rates. It is also that the southern region has started to consume wheat in larger quantities, partially replacing rice as a staple. Also, because of urbanisation and changing food habits, consumers are switching from coarse cereals to fine cereals. This would mean further demand expansion for rice.

Slower growth

Our domestic output, however, is unable to keep pace with rising demand. In the last three years, rice production has stayed trapped at 90-92 million tonnes. No wonder, the export surplus in non-basmati varieties is shrinking. Our rice export performance is a function of global rice production, import demand and prices.

It may be seen that world rice production has been rising over the last five years; but the rate of growth has considerably slowed the last three years.

A sharp expansion of 4 per cent was seen in 2005-06 (417 m.t.), after which output has been creeping up rather modestly. World rice stock-to-use ratio (an important indicator of food security) has also been tightening, with concomitant impact on prices. World rice trade last four years was an estimated 28-29 m.t.

Export curbs

According to preliminary forecasts, world rice trade in 2008 would be about 30.5 m.t. However, India may not be able to benefit from the trade expansion primarily because of tightening domestic stocks and rising internal prices.

India usually exports about 4-5 per cent of its rice production, including Basmati and non-basmati varieties. The Government of India recently imposed a restriction on exports of non-basmati varieties by stipulating minimum export price of $500 a tonne.

This was intended to ensure only superior or premium varieties are exported, while less-fine varieties are retained for domestic consumption. As a result, India’s non-basmati rice exports are set to face a steep fall, despite expanding world rice trade. Interestingly, Asia is the epicentre of world rice; and the region dominates production, consumption and trade. East Asia, South Asia and South-East Asia together account for close to 90 per cent of world rice production and consumption. Also, this region accounts for 75 per cent of world rice exports and a third of rice imports.

Under threat

India is the world’s second largest rice producer after China and a significant exporter accounting for 12-15 per cent of world trade. This position is now under threat as a result of tightening domestic availability and firming prices. If recent production trends are any indication, in the next couple of years, we will have very little export surplus of non-basmati rice left.

While rising domestic demand is a healthy sign, there is urgent need to step up rice production in order to pre-empt a mismatch. As far as agriculture is concerned, the government is good at setting targets; but there is nothing to suggest the target would be achieved.

If recent demand-supply trends continue, India would in the near future turn into a rice importer, much the way we have gone in case of wheat.

Wheat imports that started in 2006 are set to become a permanent feature, similar to edible oil and pulses. Rice too will join this list soon. Corn (maize) is another candidate for large imports; but the global price spike following large-scale diversion for ethanol purposes has made imports uneconomic. Rice yields in India are abysmally low; and there are wide regional variations.

Grown on around 44-45 million hectares, production at about 90 million translates to yield per hectare of roughly 2 tonnes. In terms of paddy, the yield is roughly 3.2-3.3 tonnes a hectare.

Why low yield?

Small size of farms and fragmented landholding are usually cited as reason for the country’s low yields. But a comparison with China is revealing. Paddy yield in China is 6.3 tonnes a hectare, almost twice that of India. China too cultivates paddy in small and fragmented holding; yet, yields are far higher. Obviously, there is something for India to learn from China insofar as rice production is concerned.

Varieties planted, amount of input used and agronomic practices do impact yields. While the national average is 2 tonnes/ha, there are regional variations in yields. Rice is grown across the country. But six States – Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh and Orissa – account for close to 17 million hectares or 40 per cent of national area under paddy/rice.

Rice yields in these six States are far below the national average and range between 1.0 and 1.4 tonnes a hectare. Yields in Bihar are some of the worst. About 3.3 million hectares are planted and the yield is an abysmal 1.1 tonne/ha. If yields in these six States are raised to the current national average of 2 tonnes/ha, the country will have additional 10-12 million tonnes of rice.

This calls for proper planning and execution of projects. Under the National Food Security Mission, the Government has planned to raise production of rice through area expansion and productivity enhancement.

Whether it succeeds or not remains to be seen. If the NFSM does succeed, India may not be forced to resort to rice imports. Otherwise, rice is set to go the wheat way.

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