The case for uniform minimum export price for rice, without basmati distinction

Source– The post is based on the article “The case for uniform minimum export price for rice, without basmati distinction” published in “The Indian Express” on 29th August 2023.

Syllabus: GS3-  Agriculture

Relevance: Agriculture pricing and marketing

News– The article explains the issues of recent government decisions on restricting the exports of wheat and rice.

What government statistics say about  rice and wheat production?

India achieved record-breaking levels of rice and wheat production in the previous year,

As per data from the Agricultural Ministry, rice output was 135.54 mt in 2022-23.

Wheat production reached 112.74 mt in the fiscal year 2022-23.

What are actions taken by the Indian government for restricting the exports of rice and wheat?

In May 2022, the government implemented a prohibition on the export of wheat. In June 2023, restrictions on stock holdings were imposed.

In September, 2022, the export of broken rice was forbidden. A 20% tariff was imposed on shipments of all non-parboiled white grains.

In July, 2023, the export of non-basmati white rice was entirely prohibited. Only parboiled non-basmati and basmati rice exports were permitted.

Recently, a 20% duty was introduced on all exports of parboiled non-basmati rice.

Why is the Indian government putting restrictions on exports of rice and wheat?

The implementation of this minimum export price rule aimed to prevent any potential illicit exports of non-basmati white rice disguised as basmati rice.

The government’s aim has been to decrease o exports in order to enhance the supply of grain within the country.

According to the official consumer price index, retail food inflation was 11.5% in July. Over the past three months, the cost of wheat flour has risen from Rs 30 to Rs 32 per kg.

What are the issues with the government initiative to limit the exports of rice and wheat?

Enforcement of limitations on exports can be evaded through inaccurate classification. In this instance, export of white non-basmati rice has taken place by utilizing the Harmonized System codes intended for parboiled and basmati rice.

There are instances where basmati rice export agreements have been established at prices as low as $359 per tonne, even though parboiled rice is being shipped out at $480 per tonne.

The majority of basmati rice exports are occurring within a range of $1,050 to $1,100 per tonne for the parboiled Pusa-1121 variety.

The $1,200 Minimum Export Price is excessively high. Only steamed Pusa-1121 and 1718 rice are achieving prices of $1,200-1,300, in addition to the traditional premium basmati priced at $1,550 per tonne. These types account for just around 15% of our basmati exports.

Way forward-

The government should eliminate the differentiation between basmati and non-basmati rice. There can be a consistent MEP of $800-900 per tonne for all types of rice, whether basmati or parboiled, including white non-basmati.

Implementing a uniform MEP of $800 per tonne would enable the export of all these premium rice types without compromising domestic food security.

This approach would not only benefit basmati farmers, but also protect those who cultivate other premium varieties not distributed through the Public Distribution System.

For the government, this approach would eliminate concerns related to misclassification or unauthorized exports of non-basmati rice disguised as parboiled or basmati rice.