“Intra-sector competition has given rise to a large number of NPAs”

In his interaction with TPCI, Mr. Vijay Setia, President, All India Rice Exporters Association (AIREA), talks about how the Indian rice industry is placed on the global landscape, challenges with respect to NTBs, MRLs and trade agreements as well as major potential markets that India is targeting for its rice.

TPCI: According to recent reports, the withdrawal of 5% tax rebate earlier meted out to non-basmati rice exports under MEIS has led to the decline of exports. What, in your opinion, should be done to rectify this situation?

Mr. Vijay Setia: The export price of non basmati rice is strictly driven by the Minimum Support Price (MSP). During the last Kharif crop of 2018-19, the MSP was Rs 1750/Qtl for coarse rice and Rs 1770/Qtl for superfine rice. The export price with this MSP encroaches the international price and hence our prices become uncompetitive in most markets. The incentive of 5% MEIS, which was granted by Government of India to rice exports during only a short period of about four months last year (November 2018-25^th March, 2019) gave a boost to exports since this led to offsetting some part of the cost. This resulted in a jump in exports during these months as compared to earlier periods as shown in table below. But since the incentive of MEIS was withdrawn effective March 26, 2019, the impact has started becoming visible from June onwards when there has been huge drop in exports. While in March 2019, export was 814,922 tonnes; in April, May, June and July, it dropped to 308,175 tonnes, 413,597 tonnes 482,633 tonnes and 502,486 tonnes respectively.

India’s rice export trends

Months	2017-18	2018-19	2019-20
April	475,050	642,792	308,175
May	547,782	795,322	413,597
June	700,311	587,061	482,633
July	721,802	544,121	502,486
August	782,925	631,020
Sept	720,666	510,601
Oct	636,425	617,488
Nov	643,889	562,737
Dec	732,124	683,284
Jan	650,096	507,148
Feb	737,388	550,918
March	721,867	814,922
Total	8,070,325	7,447,414	1,706,891

Quantity in tonnes

As compared to export of non-basmati rice of 25,69,296 tonnes during April-July 2018, the figure has dropped drastically to 16,94,153 tonnes during April-July 2019, reflecting a drop of 34% over previous year.

The Government of India must restore the MEIS benefit for rice since it is a major commodity of export in the agriculture basket of India.

TPCI: How is the Indian rice industry placed in the global landscape? What is the aspiration that the industry sets for itself in the coming 5-10 years – vis-a-vis export volume/value growth, brand equity, domestic consumption, etc? What is the strategic roadmap that AIREA has set to achieve these aspirations in collaboration with the industry?

Mr. Setia: India is the top exporter of rice in the world followed by Thailand, Vietnam, Pakistan and USA. However, the scenario may show a dynamic shift if the current declining trend continues during the current financial year any longer. The industry today is in a dilemma. Though production of rice in India is growing, the industry has been investing hugely in setting up state-of-the-art facilities and there is a great potential to retain the top spot in the global market for India. Yet, the sanitary stringent norms of importing countries, non-availability of incentives from the Government, high logistics costs could play spoilsport in this effort of the industry. As for brands, it is again a very dicey issue since the Government of India imposes GST of 5% on branded rice, which leads to higher cost to brand owners compared to unbranded rice and proves to be a disincentive to branding. 

AIREA and industry have been working collectively and jointly in efforts to redeem the industry from the clutches of difficulties in external trade. We are regularly trying to educate farmers for the past four years about safe agronomic practices, etc. This bonding will be further strengthened to boost the morale of the industry, which is currently in a depressing state. 

IBT: What are your views on the impact of trade agreements on India’s rice exports? What should be the desired approach towards future trade agreements, in context of the rice industry?

Mr. Setia: The motive and objective of trade agreements is to progressively liberalize and facilitate trade in goods among the parties through, inter alia, progressive elimination of tariff and non-tariff barriers in substantially all trade in goods among the parties. Now, there is a very thin line between tariff and non-tariff barriers today and sanitary issues are actually being used to create NTBs across countries. We feel that in any trade agreement, the basic criteria should be

(a) Prominence of the market in regard to Indian rice

(b) Revealed Comparative Advance to India in that country

(c) Mutual duty concessions and

(d) Mutual conformity assessment in regard to sanitary issues and other NTBs.

IBT: How are the Indian rice varieties – Basmati & non-Basmati – perceived in the global market vis-a-vis their foreign counterparts?

Mr. Setia: Basmati rice is a unique product of India and is also a Geographical Indication (GI). It derives preference from more than 130 countries to which India exports in excess of 4 million tonnes annually. As for non-Basmati rice, the choice of consumers is reflected from the magnitude of business in excess of 7.5 million tonnes to over 130 countries. Credit for this must go to Indian exporters of rice who have left no stone unturned in establishing state-of-the-art facilities in terms of infrastructure, in-house laboratories etc and spent huge amounts on brand building and in turn adhering to stringent trade requirements of the global market.

IBT: What are the major potential markets that India is targeting for its rice? How are the efforts to enhance exports panning out in China?

Mr. Setia: Western Africa has become a major destination for Indian non-basmati rice in particular over the past few years. Indian exporters are endeavoring to strengthen their presence in these markets. For Basmati rice, Middle East has traditionally been a stronghold area. Iran and Saudi Arabia being prime countries. But the need is to not only strengthen these markets but also to look for diversification in CIS/CAR countries. There have been efforts at the Chinese market which may take some more time to establish primarily because of the food habits in that country where preference is for sticky rice and Indian rice is generally fluffy in nature.

IBT: How is the industry preparing for tougher MRL norms laid down by importers like Saudi Arabia, Europe & US? Any other significant barriers to exports that you would like to discuss?

Mr. Setia: With growing concerns amongst global consumers about food safety, many countries are continually adopting stringent sanitary norms in terms of Maximum Residue Levels (MRLs) of various Plant Protection Products (PPPs). This is a huge task since it involves regular training at the farm level to educate all stakeholders about the judicious use of PPPs. AIREA and its members have over the last few years taken up; this task and regular awareness programs are being conducted. But since rice production in India involves millions of farmers, who all have small land holdings, the task itself becomes very difficult. There is need, therefore, to have government intervention in organizing this activity apart from controlling the sale of PPPs so that the menace could be controlled.

IBT: What are rice industry’s expectations from the upcoming Foreign Trade Policy? How can it boost India’s rice exports in a manner that does not infringe on WTO norms?

Mr. Setia: Our suggestion would be to create conducive and enabling policy environment for boosting rice export. In the recent past, there has been some discrimination towards the rice sector particularly in terms of advancing the incentives that can help in maintaining price competitiveness in the sector and also sustaining trade in the commodity. A situation has arisen where intra-sector competition has given rise to a large number of companies becoming NPAs.

IBT: Has the imposition of sanctions on Iran by the US had any implications for India’s basmati exporters?

Mr. Setia: Yes, over the last few years, Iran has gained ascendency over other markets as far as export of Basmati rice from India is concerned. In fact, there has been a nexus between import of oil from Iran and export of Basmati rice from India. The payment mechanism is linked to the two. However, in view of the sanctions imposed by US on Iran leading to restriction on import of crude from Iran, a serious fall out impact on Basmati rice is prominently visible. There are a large number of consignments held up at Iranian ports for the last three months awaiting clearance and this has blocked huge funds of exporters who are in doldrums today.

Bringing tremendous experience with him, Mr. Vijay Setia has been associated with premier organisations in the rice industry including  Gerson Lehrman Group (GLG) USA, Punjab Rice Millers Association & Rice Milling Cluster Development, Karnal. He is also Executive Director, Chaman Lal Setia Exports and the brain behind major experiments like the development of rice suitable for diabetics, technology for paddy drying with less energy consumption and parboiled waste water reuse system.