Explained | The ban on the export of broken rice

Source: The post is based on the article “Explained | The ban on the export of broken rice” published in The Hindu on 19th September 2022.

What is the News?

The Government of India has instituted a ban on the export of broken rice. Additionally, it mandated an export duty of 20% on rice in the husk (paddy or rough), husked (brown rice) and semi-milled or wholly-milled rice. These measures do not affect the export of basmati or parboiled rice. 

What happened to rice production this year?

The major rice cultivation season in India is the Kharif season, which entails sowing the crop during June-July and harvesting them in November-December.

Rice is a water-intensive crop which requires a hot and humid climate. Thus, it is best suited to regions which have high humidity, prolonged sunshine and an assured supply of water. 

It is for this reason that the eastern and southern regions of the country, with sustainable humidity and suitable mean temperatures, are deemed favourable for the crop. 

However, there have been potentially lower rice production this year due to deficient rainfall in some areas.

What will be the impact of this ban on the export of broken rice?

On Inflation: The lower the supply of a commodity, the higher would be the price of a product, which results in inflationary pressures. The adequacy of rice stocks in the country would ensure that markets do not experience excess demand and thus trigger an abrupt price rise.

On Ethanol Blending Programme: Ethanol is an agro-based product, mainly produced from molasses, which is a by-product of the sugar industry. 

– The Ethanol Blending Programme(EBP) endeavors to blend ethanol with vehicular fuels as a means to combat the use of fossil fuels and in turn, rising pollution. 

– As per the government, sugar-based feedstocks alone would not be able to meet its stipulated target of 20% ethanol blending by 2025.

– In the 2018-19 Ethanol Supply Year (ESY), the government had allowed the FCI to sell surplus rice to ethanol plants for fuel production.

– However, in the ongoing ESY, because of supply constraints, there has been an uptick in the procurement of rice from the FCI. This means that the production accruing from FCI rice has increased 10-fold from the 2.2 crore litres used in a full ESY. At the same time, production from damaged food grains stands at half.

– Thus, the export ban would endeavor to catch-up with this supply and additionally, unburden the FCI from provisioning to distillers.

What are the likely effects of this ban globally?

India accounted for 41% of the total rice exports in the world in 2021 larger than the next four exporters (Thailand, Vietnam, Pakistan and United States) combined.

In descending order, China, Senegal, Vietnam, Djibouti and Indonesia are the biggest importers of India’s broken rice. Hence, these countries would be impacted by the ban.

However, Thailand, Vietnam and Pakistan would gain if we lose this market. Once lost, regaining the market would be a task.