Basmati exporters eye futures deals

The country's basmati rice exporters are devising ways to ensure that their margins do not take a hit every time the government revises the minimum export price (MEP) of the commodity.

Officials from 3-4 leading companies said they intend to enter future contracts in a way that the MEP increase is taken care of.

"We plan to have a clause in our export contract saying that either this is the price of export or the MEP, whichever is higher," said a leading exporter. While this would take care of exporters' interest, it will defeat the government's purpose of putting a check on shipments.

On March 5, the government notified an MEP of $900 a tonne (freight on board price) on basmati rice and subsequently raised it to $1,100 a tonne from March 27. 
 

BASMATI RICE EXPORTS
Year	Quantity (in million tonnes)	Value (in Rs cr)
'01-02	0.666	1,841
'02-03	0.710	2,062
'03-04	0.771	1,993
'04-05	1.162	2,823
'05-06	1.166	3,043
'06-07	1.045	2,729

On March 31, the Cabinet Committee on Prices (CCP) decided to raise the MEP to 1,200 a tonne since inflation for the week ended March 15 touched a 13-month high of 6.68 per cent.

On April 3, the duty entitlement passbook (DEPB) scheme benefit was also withdrawn. All these moves were aimed at discouraging export of the commodity and thereby augmenting domestic availability.

With the latest revision in the MEP to $1,200, exporters say there is a need to renegotiate the prices since most export contracts had been entered at a price ranging between $900 and 1,000 a tonne.

Some have already shipped the quantities they contracted during October-November and are therefore unaffected by the MEP hike.

"We have executed the contracts that were entered last year. The fresh contracts are being entered at an FOB price of $1,300 a tonne and above," said Anil Mittal, chairman and managing director, KRBL, owner of the 'India Gate' brand.

The country exports over 70 per cent of the basmati rice that it grows. Export of the commodity stood at 1.045 million tonnes worth Rs 2,792 crore in 2006-07. In the April-November period of 2007-08, 648,231 tonnes of basmati rice, valued at Rs 2,028 crore, were exported.

We must remember that this a commodity where Pakistan is our single largest competitor and it has not put any restriction on shipments.

While the current phase of instability will pass, we need to make sure that our relationship with our buyers does not suffer, industry officials added.