Basmati rice exporters in a fix over falling prices

Future looks tense as export deal with Iran delayed, international prices also low

Basmati rice exporters are worried at a sudden fall in realisation in the wake of a supply glut.

Data compiled by the Agricultural and Processed Food Products Export Development Authority show a decline in export by a marginal 1.5 per cent in volume terms to 3.7 million tonnes in 2014-15, as compared to 3.76 mt the previous year. In value terms, however, the fall was 7.5 per cent, showing a five per cent fall in average realisation.

“Iran has purchased a lesser quantity in the past 18 months, largely for political reasons. If demand picks up and the price firms up, we can grab some market share from Pakistan,” said Gurnam Arora, joint managing director, Kohinoor Foods.

The Saudi Arabia and Europe markets did reasonably well. Saudi Arabia took over from Iran as India’s largest destination for basmati rice export in 2014-15. It imported 966,931 tonnes worth $1,188 million, as compared to 826,289 tonnes valued at $1,109 mn in 2013-14.

Shipment to Iran declined 39 per cent in value terms, to $1,108 mn (935,568 tonnes) in 2014-15 versus $1,835 mn (14,40,654 tonnes) the previous year.

“The government of Iran takes a rice import decision based on the current paddy crop. Since September is the normal harvesting season, any decision on bilateral rice import will be taken only around that time. Normally, they reduce customs duty on import from the Most Favoured Nation. So, we will have to wait a couple of months for any purchase agreement to get signed with India,” said Ajai Sahai, Director General, Federation of Indian Export Organisations.

A deal with Iran was expected to get signed in April but didn't happen. Currently, only a few exporters are interested in shipping to Iran, due to uncertainty over special treatment for Indian exporters.

“Global prices of rice have declined to the level of 2008. Emergence of some competitors has also lowered basmati rice demand from India’s perennial importers. Third, importing countries are holding Indian rice imported earlier and are now disposing that inventory instead of ordering new quantities,” Sahai added.

Meanwhile, the United States also lowered its basmati rice purchase during the last financial year. After importing 103,378 tonnes worth $143.88 million in 2013-14, total basmati rice exports to the United States fell to 80 540 tonnes valued $132.30 million in 2014-15.

 

"Basmati rice exporters are bleeding due to high cost of processing and low realisation. Cost of paddy procurement for 1121 variety of basmati rice stood at Rs 40,000 a tonne. On processing, basmati rice manufacturing cost works out to Rs 70,000 a tonne. Further incurring cost on exports should yield at least $1800 a tonne," said M P Jindal, President, All India Rice Exporters' Association.

So, the industry incurred a loss of around 30% during the financial year 2014-15 after similar loss witnessed in the previous year. Two consecutive years' loss has threatened existence of many basmati rice exporters. Jindal urged the government to protect interest of India's basmati rice exporters through some export subsidy.