Basmati exporters are a relieved lot, with the European Union having decided to retain the existing tariff structures for basmati imported from India. Earlier, there were apprehensions that duties on Indian basmati would be brought at par with rice imported from other countries like Pakistan and the US.
As a result of the move, Indian basmati, which has the disadvantage of being priced higher due to its premium quality, will continue to get the same tariff benefits from the trade block. As per the existing tariff structure, costlier basmati rice attracts a lower import duty and also a European currency unit reduction.
Exports from India to the EU is currently around 1.5 lakh tonnes. Indian basmati is priced around $575-625 per tonne, while Pakistani basmati costs $350 and American basmati costs $450. Due to the present tariff structure, Indian basmati attracts almost zero duty while getting the benefit of European currency unit reduction.
The duty structure, contained in Headnote 7 of the EU Offer on Agriculture, states the higher the price of a particular variety of rice, the lower will be the import duty applicable on it. This clause has made exports of Indian basmati to the EU practically duty free.
The EU had introduced this clause to protect its domestic paddy industry and increase the market price of the commodity in the home turf. Basmati from India is given a 250 European currency unit reduction in duty equivalent to a $330 reduction, while rice from Pakistan enjoys only a 50 European currency unit reduction.
