India: Rice exports to squeeze due to MSP, scanty rains

  • India, the world’s largest rice exporter, could see a decline in exports in 2019 due to rise in minimum support price (MSP) of paddy and scanty rains in the current kharif season. Rice processing and exporters anticipate a drop from exports pegged at INR550bn per year.
  • Rice exporters in India are expecting the slide in export of non-basmati to continue in 2019 as they face trimming of margins after the latest hike in MSP by 3.7% for paddy announced by the federal government.
  • “Export of rice is sure to fall drastically as the government has not extended interest subvention on export of the commodity to compensate the rising cost of procurement,” BV Krishna Rao, president of the Rice Exporters Association, told ET.
  • To supplement farm income, the National Democratic Alliance (NDA) increased paddy procurement price by 13% in 2018 and the latest hike is for the current kharif season. “It will make rice exports from India dearer and squeeze margins to unmanageable levels for exporters,” Rao said.
  • Non-basmati rice export fell 15% in FY19 as procurement price spiked. The export stood at 4.8 million tonnes in FY19 compared to 6.3 million tonnes in FY18.
  • Rice exporters were given 5% interest subvention under the Merchandise Exports from India Scheme (MEIS) as relief from higher domestic prices of the commodity earlier.
  • Despite an upswing in volumes and value of premium rice in 2018, exporters of basmati rice are also anxious. Exporters maintain that in the last season the loss of margins were compensated despite the increase in MSP due to the depreciation of the rupee against the US dollar. But the situation has turned unfavourable after the US hurdles in import of crude oil from Iran that is set to affect the rice trade.

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