Why is India's basmati rice export seeing a decline?

From risotto to Iranian pulao, Indian Basmati has been an essential part of recipes savoured in different parts of the world for ages.

Basmati rice is popular due to its long grains, distinctive texture, and rich fragrance. People world over swear by its taste. In India too, biryani or matar pulao cannot be imagined without basmati.

All of this has made Basmati rice one of India's oldest anchors in farm exports. Its main producing regions are the states of Punjab and Haryana, along with the foothills of the Himalayas. India is still the world’s largest exporter of basmati. But, its export is now coming down.

India clocked the highest-ever agriculture exports of over 50 billion dollars in FY22. 

But for the third consecutive year, exports of Basmati rice saw a fall over the previous year in value terms. This fact has been highlighted by the provisional figures. In 2021-22, India exported 3.53 billion dollars worth of Basmati rice, the lowest since 2019-20.

Experts have told Business Standard that the reasons for the continued fall in exports include the loss of the traditional market of Iran due to US sanctions. Shipments to Iran plunged 26% from a year ago to 834,458 tonnes. It was mostly because Iran’s rupee reserves dwindled.

APEDA Chairman M Angamuthu told Business Standard that in some areas, due to an increase in minimum support price, the Basmati acreage had been overtaken by non-Basmati rice.  

In the last three years, around 20 per cent area has shifted from Basmati to non-Basmati rice in these regions. This is due to reduced price differentials.

Fungicide problems in the European Union is also a big contributing factor.

Trade policy analyst S Chandrasekaran told Business Standard that Basmati sales to the EU had dropped to 150,000-200,000 tonnes from 500,000 tonnes a year.

One of the most common Basmati rice varieties produced in India does not qualify for duty rebate from the EU.

Adding another blow to Basmati export, Oman, Egypt, Jordan, UAE, and Saudi Arabia adopted pesticide residue norms in 2021 that were on par with those in the EU.

This had led to apprehensions that if Indian farmers were not given time to bring about changes in their pesticide use, Basmati exports would take a big hit due to these stringent norms.

India’s Basmati exports to the EU have been falling since the region tightened its pesticide residue norms in 2017.

But, on the other hand, overall rice export has seen a big jump. India is the world's biggest rice exporter. It exports non-Basmati rice to African countries and Basmati to the Middle East. 

According to a report, India's total rice exports saw a jump of nearly 46 per cent in 2021 from a year ago to a record 21.42 million tonnes.  The jump came as Bangladesh, China and Vietnam increased purchases.  

Also, the existing challenges in the EU and the possibly new ones in West Asia by no way mean that the appetite for Basmati is dwindling.

Basmati is one of India's signature food items. Efforts should be made to revive its exports, especially since much of the market is slowly shifting towards Pakistan, India’s primary rival in the global Basmati trade.

But experts point out that the export may pick up soon. Recently Latin America opened its doors to Indian Basmati rice for the first time ever. Talks between Iran and the US on nuclear agreement also offer hope. If they reach an agreement and sanctions against Iran are lifted, export of Indian Basmati to Tehran will re-start.