Unpleasant yet necessary? Weighing the pros & cons of India’s rice export ban

To ensure ample availability of Non-Basmati White Rice in the Indian market, counter the surge in prices and guarantee sufficient supply, the government has ‘Prohibited’ exports of the commodity with immediate effect.

While the decision by the government will have a major impact on rice exports, the decision is logical in view of the ongoing rise in prices and uncertainties on the impact of El Nino. TPCI’s research team looks at the market scenario and likely impact of the ban and what factors will determine crop production/possible reversal of the ban in the coming months. 

  • The prohibition on the export of Non-Basmati White Rice aims to ensure availability and lower prices for consumers in the country.
  • Domestic rice prices have been rising steadily, with retail prices increasing by 11.5% over a year and 3% over the past month.
  • Non-Basmati White Rice constitutes about 25% of the total rice exported from India.
  • The surge in rice exports from India can be attributed to global factors like the El Nino influences, and extreme climatic conditions impacting rice production in other countries.

Rice_TPCI

In a notification on July 20, 2023, the Government of India amended the Export Policy of the Non-Basmati White Rice variety from ‘Free with export duty of 20%’ to ‘Prohibited’ with immediate effect. This has been done to ensure adequate availability of this variety in the Indian market and control price rise. Retail prices of rice have risen by 11.5% over a year and 3% over the past month.

The export duty of 20% had been imposed on September 8 last year for the same reasons.  However, exports have still increased from 33.66 LMT (Sept-March 2021-22) to 42.12 LMT (Sept-March 2022-23). During April-June, 2023-24, about 15.54 LMT of this variety of rice was exported, an increase by 35% YoY. Non-Basmati White Rice constitutes about 25% of total rice exported from the country.

Impact of El Nino on India & global price surge

The ban on exports by India, which is the largest rice exporter, has raised global fears of shortages. Despite the near record outlook forecasts for rice production in major countries such as Bangladesh, China, India, Indonesia, Thailand, and Vietnam, some global trading houses anticipate that the impact of El Nino could also hinder output in these key rice-producing nations.

Rice production is expected to reach a 20-year low in 2023 as analysts fear, with other top producers like China and Pakistan also impacted by the weather. The production in Pakistan is expected to  be down by 31% YoY according to USDA. It immediately triggered panic buying in the US, where Asian communities in particular thronged to supermarkets to stock up, according to reports.

El Niño is a climate pattern that describes the unusual warming of surface waters in the eastern tropical Pacific Ocean. The reoccurrence of the El Nino weather pattern has raised concerns, resulting in benchmark prices reaching a two-year peak. These apprehensions stem from the potential risk of crop damage, which could further escalate already rising global rice prices.

The global rice industry is currently facing a substantial decrease in production, which is projected to be the most significant shortfall since 2003. Several factors, such as insufficient rainfall in India, have resulted in limited supplies and a strong tightening of the market.

The majority of rice, which serves as a staple for more than 3 billion people, originates from Asia. However, the El Nino weather pattern in this region often leads to decreased rainfall. Even prior to potential disruptions in production caused by El Nino, the global rice price index remains above an 11-year high.

Impact of New MSP in price hike of Indian rice

Another factor which is contributing to price hike of Indian rice is the minimum support price (MSP) set by the government for the 2023-24 crop year, spanning from July to June. The MSP for the common variety of rice has been raised from INR 2,040 to INR 2,183 per quintal, indicating an increase.

There is a unanimous view among traders that prices may start to decline from September onwards.

Global market prices for Indian rice have climbed by around 10%, but they are still competitive considering the increase in prices of rice from other countries. Nevertheless, the higher prices have resulted in a decrease in demand for exports.

Prices of Indian rice have seen a rise of 5-10% in recent times, which is a usual occurrence during the lean season spanning from July to September.

The prices of parboiled rice, which is in high demand from Vietnam and African nations, has escalated from the range of US$ 380-390 per tonnes to US$ 430 per tonne, according to the source.

Despite these developments, the US Department of Agriculture (USDA) is expecting India to witness an increase in rice exports, reaching 24 million metric tons in the marketing season of 2023-24. The USDA has also estimated India’s rice production to be approximately 1304 million metric tons, slightly lower than the record-breaking 136 million metric tons achieved in the current season.

Current performance and future outlook

The government has not changed the Export policy of Non Basmati Rice (Par Boiled Rice) and Basmati Rice, which forms the Bulk of Rice exports. This decision aims to secure continued advantageous prices for exporters in the global market.

The ban on non-basmati rice will certainly have an impact on the further price surge in the global market. But, as India’s exports of other rice varieties will continue, it is crucial to take a look at the changing market scenario.

India’s rice exports at 8-digit level

HS Code Commodity Exports in 2022-23
(US$ million)
Exports in 2021-22
(US$ million)
Growth (YoY in %)
10063020 Basmati Rice 4,787.50 3,537.49 35.34
10061010 Rice in husk of seed qlty 44.27 56.57 -21.74
10061090 Othr rice in husk 121.28 155.79 -22.15
10062000 Husked (brown) rice 9.01 23.25 -61.24
10063010 Rice parboiled 2,994.20 2,764.69 8.3
10063090 Rice excptg parboiled (excl basmati rice) 2,203.52 2,000.39 10.15
10064000 Broken rice 983.47 1,132.94 -13.19

Source: DGCIS

The government has banned exports of HS 10063090 (Non-Basmati Rice excepting parboiled), but HS 10063010 (Rice parboiled, i.e. partially boiled in husk) is allowed. Parboiling of rice is said to retain some of the nutrients that are otherwise lost in refining. Together, these varieties accounted for over 46% of India’s total rice exports in 2022-23. We did an analysis of the top 10 markets of each of the two categories, which is summarised in the following pie charts. African markets have a dominant share in exports of both commodities.

HS 10063010_TPCI

For parboiled rice, the top 10 markets accounted for a significant 67% of exports in 2022-23. The top markets were Benin (12%); Bangladesh (9%); Guinea (9%); Cote D’ Ivoire (9%) and Togo (8%).

When it comes to the prohibited category, India has a relatively more diversified market presence, with the top 10 markets accounting for 59% of the total exports. The top markets were Benin (8%); Kenya (8%); Madagascar (8%); Cameroon (6%) and Cote D’ Ivoire (6%).

HS 10063090_TPCI

Vinod Kumaar Kaul, Executive Director of All India Rice Exporters Association shared his views on India’s export potential market and the future potential of India’s rice exports.

When asked about the promising markets for exports, he explained, “For Basmati rice, Middle East accounts for a major chunk of share in overall exports from the country. Similarly, for non-Basmati rice African continent accounts for the largest share in overall exports.”

Basmati rice

Region 2022-23 Apr-May’2022 Apr-May’2023
  Qty-MT Val-$mn Qty-MT Val-$mn Qty-MT Val-$mn
Asia 73,981 65.00 6,995 6.69 15,339 14.83
South East Asia 93,665 98.00 12,446 12.77 12,990 13.89
Africa 189,834 201.00 28,932 29.23 38,711 41.23
Americas 268,504 315.00 51,191 58.41 45,302 58.44
Oceania 51,852 63.00 7,838 9.41 9,273 11.32
Russia/CIS 20,296 21.00 2,184 2.18 5,773 6.31
European Union 152,881 167.00 16,407 17.75 41,644 52.59
Other Europe 170,166 166.00 16,244 16.38 46,186 53.96
Middle East 3,537,928 3,689 543,136 545.21 615,155 665.90
Carribeans 1,655 2 190 0.21 485 0.64
Grand Total 4,560,762 4,788 685,563 698.25 830,858 917.11

Non-Basmati rice

Region 2022-23 Apr-May’2022 Apr-May’2023
Qty-MT Val-$mn Qty-MT Val- $ mn Qty- MT Val- $mn
Asia 3,623,845 1,215.00 679,453 229.92 138,287 49.82
South East Asia 1,325,507 468.00 223,743 77.33 292,056 103.12
Africa 11,272,900 3,848.00 1,549,360 529.59 2,096,763 7,434.29
Americas 179,670 112 9,596 7.49 36,161 22.28
Oceania 19,445 10 3,965 1.98 3,260 2.00
Russia/CIS 136,297 53 13,159 5.13 27,020 11.09
European Union 72,946 38 14,868 8.01 12,515 7.12
Other Europe 123,323 56 8633 5.48 17,682 9.83
Middle East 1,029,741 555 1,77140 98.62 220,613 111.17
Carribeans 2,883 2 58 0.04 1,533 0.70
Grand Total 17,786,557 6,356.00 2,679,975 963.60 2,845,890 1,060.41

He added that this trend is more than likely to continue henceforth. However, there are possibilities for diversification in the markets within the regions. For instance, Cuba imported substantial quantities of non-Basmati rice last year, in excess of 100,000 tonnes. Likewise, Mexico and Brazil also imported fair quantities during post-Covid years.

It can be assumed safely that Basmati rice exports will continue to remain in the vicinity of 4.6-2.8 million tonnes year-on-year in keeping with the recent trends. He concluded, “In the non-Basmati rice segment, India is the top exporter and during the last two completed financial years, export has been in excess of 17 mn tonnes. This is because India continues to enjoy a price advantage over other competitors and in Africa, we can strengthen our position by supplying uniform quality.”

Future outlook

While the decision by the government will have a major impact on rice exports, the decision is logical in view of the ongoing rise in prices and uncertainties on the impact of El Nino. Australian Bureau of Meteorology predicts that El Nino could increase sea surface temperatures by around 3°C by September, while the Indian Meteorological Department predicted that temperatures would not exceed 1.5°C during the entire season.

It was feared that uneven rain in vari0us parts of India in July would be damaging for kharif crop production. Indeed, during the first two weeks of July, the rains were far heavier in North West India (surplus of 59%), while there was deficient rainfall in southern, eastern and north-eastern regions (-19%), thereby affecting the pace of kharif sowing operations. So while monsoon deficiency is not an issue, the distribution of monsoon has been highly sub-optimal. In places  like Punjab and Haryana, it can damage the standing Basmati Rice crops. Non-Basmati rice regions facing low rainfall include UP, Bihar, Jharkhand, Chhattisgarh and West Bengal.

While the transplantation of  rice (from nursery plantations) may get delayed in these areas, the situation is still largely retrievable if rains come in the first week of August (there will be some production loss but not so significant, as per this interview in the Hindu Business Line). If there are no rains by around August 7-10, however, it will be too late for farmers to transplant and they may have to shift to crops like mustard or maize. That will lead to a significant production loss for paddy.

As of June, the Government’s rice procurement has reached 55.8 million tonnes in the 2022-23 marketing season (October-September) and is well placed to fulfil its food grain requirements (rice and wheat), according the Ministry. Given that the government is comfortably placed, industry players feel confident that the current ban may be temporary, and may be reconsidered once we have a firm estimate on crop production and easing of inflationary pressures.

Comments

  1. Very useful information. Should have mentioned though the facts on Organic rice segment. Looking forward.

  2. The USDA has also estimated India’s rice production to be approximately 1304 million metric tons, slightly lower than the record-breaking 136 million metric tons achieved in the current season. – are the numbers correct?

Leave a comment

Subscribe To Newsletter

Get to know of latest happening in TPCI & in the world of trade and commerce