For the first time in eight years, India’s rice output is expected to drop this year, raising the prospect that Prime Minister Narendra Modi’s government will extend curbs on exports of the grain to keep a lid on food prices ahead of elections.

Production in India, the world’s largest rice exporter, is under unusually intense focus after New Delhi banned exports of non-basmati white rice in July, sending global prices surging.

However, the state of the crop is hard to predict following an uneven monsoon. Output could fall as much as 8% from last year’s record despite an increase in area under paddy, according to various forecasts.

The weaker output along with persistently high domestic rice prices ahead of five State elections this month and a general election next year have left farmers and traders worried that the government will prolong restrictions on exporting the grain.

Ramkali Bhargav, a farmer in Uttar Pradesh, said her paddy fields had recovered from an early season dry spell followed by floods. But just before harvesting, heavy rain and winds flattened her rice crop.

“If the rainfall hadn’t occurred for another fortnight, our yields could have been at least 30% higher,” she said, slicing a sickle through toppled paddy in Chharasi village.

The crop loss is a problem for governments and consumers across Asia and Africa that have struggled to secure supplies of the staple since prices in the global market jumped to a 15-year high after India restricted its rice exports, which account for 40% of global rice trade.

Prolonged export curbs could further inflate food prices given low inventories in other key exporting countries including Thailand, Vietnam, Pakistan and Myanmar.

“With elections looming, the government’s hypersensitivity to food prices makes even a slight production dip sufficient to justify maintaining export restrictions,” said a New Delhi-based dealer with a global trade house, declining to be named due to company policy.

A senior government official, also declining to be named, told Reuters that India does not intend to lift restrictions on any rice grades in the near future.

Diminished crop

In the year to June 2023, India produced a record 135.76 million tons of rice.

Two leading global trade houses, both declining to be named, told Reuters they expect India’s rice output for the current crop year to drop by 7% and 8%, respectively, from the previous year.

B.V. Krishna Rao, president of the Rice Exporters Association (REA), told Reuters he expects a smaller production drop of about 2% to 3%, as heavy rain benefited late-planted crops in some areas even as it damaged fields elsewhere.

The U.S. Department of Agriculture expects a 3% decrease in India’s rice output, a decline of around 4 million tons, to reach a total of 132 million tons for the year ending in June 2024.

India’s Ministry of Agriculture & Farmers Welfare last week said production from the summer-sown crop could fall 4% to 106.3 million tons. It will provide an estimate for total output in its second report, typically published in February.

The soon-to-be planted winter crop is expected to drive a disproportionate share of the year’s decline.

In recent years, production from winter-sown paddy has risen significantly, but this year, output is likely to decline by up to 5 million tons or nearly 20% due to lower water levels in reservoirs, said a Kolkata-based exporter, declining to be named due to the sensitivity of crop forecasts.

Water levels in India’s main reservoirs were at 71% of capacity in the week to October 26, down from 89% a year ago, government data showed, after a summer monsoon that delivered unevenly spread rains.

Election Season

Food inflation is highly sensitive in India, where Modi’s government has also banned wheat exports, restricted sugar and onion exports, and allowed duty-free imports of pulses in efforts to curb prices.

Despite export restrictions, local rice prices remain almost 15% higher than a year ago.

Meanwhile, India is considering extending a programme that provides free or subsidised cereals to more than 800 million people, with diminishing wheat stocks forcing increasing reliance on rice.

The government’s priority is to ensure ample rice supplies for subsidised distribution, and export considerations will only come after general elections, predicted Himanshu Agarwal, executive director at Satyam Balajee, India’s biggest rice exporter.

In response to India’s curbs, Thailand and Vietnam have increased exports but have limited surpluses, said Nitin Gupta, senior vice president of Olam Agri India, a top rice exporter.

“If India sticks to the export ban for a while, bridging the supply gap could be difficult, leading to the possibility of even higher prices,” Mr. Gupta said.

In the fields, farmer Bhargav says there’s little that can be done about unpredictable weather. “We are incurring losses from paddy cultivation,” she said. “Let’s hope the upcoming wheat crop gives us better returns.”

The government has imposed a 20% duty on the export of parboiled rice, a move aimed at maintaining adequate local stock and keep domestic prices under check.

The export duty, imposed on August 25, will remain effective till October 16, 2023, the Finance Ministry said in a notification.

Duty exemption would be available on parboiled rice lying in customs ports which have not been granted LEO (let export order) and are backed by valid LCs (Letter of Credit) before August 25, 2023.

With these curbs, India has now imposed restrictions on all varieties on non-basmati rice. Non-basmati white rice constitutes about 25% of the total rice exported from the country.

Also read | Centre bans export of non-basmati white rice to check price rise

Last month, the government banned exports of non-basmati white rice to boost domestic supply and keep retail prices under check during the upcoming festive season. In September last year, exports of broken rice were prohibited.

In the April-June period of this fiscal, about 15.54 lakh tonnes of non-basmati white rice was exported against only 11.55 lakh tonnes in the year-ago period.

The ban on exports of non-basmati white rice was imposed due to the rise in prices of the foodgrain and higher exports.

The annual retail or consumer price inflation has touched a 15-month high of 7.44% in July, against 4.87% in June, amid a sharp spike in food prices.

A week back, India had imposed 40% export duty on onion to increase domestic availability.

India’s total exports of basmati rice stood at $4.8 billion in 2022-23 in terms of price, while in volume terms it was at 45.6 lakh tonnes.

Exports of non-basmati stood at $6.36 billion in the last fiscal. In volume terms, it was 177.9 lakh tonnes.

India’s rice production is estimated to have risen to 135.54 million tonnes in the 2022-23 crop year (July-June) from 129.47 million tonnes in the previous year, according to the agriculture ministry data.

The domestic prices of rice are on an increasing trend. 
| Photo Credit: The Hindu

The Centre banned the export of non-basmati white rice on Thursday. The Directorate General of Foreign Trade under the Union Commerce Ministry announced in a notification that the ban would come into effect immediately and exemptions would be given only if the loading of non-basmati rice on the ship had commenced before the notification or the shipping bill was filed and vessels had already berthed or arrived and anchored in Indian ports. This variety of rice constitutes 25% of the total rice export from the country.

The Union Food Ministry, in a statement, said the step was taken to ensure adequate availability of non- basmati white rice in the domestic market and to curb the price rise. Non basmati rice was exported under the category ‘Free with export duty of 20%’. “The domestic prices of rice are on an increasing trend. The retail prices have increased by 11.5% over a year and 3% over the past month,” the statement added.

Export duty of 20% on non-basmati white rice was imposed last year to lower the price and to ensure availability in the domestic market. “However, the export of this variety increased from 33.66 lakh metric tonnes (September-March 2021-22) to 42.12 LMT (September-March 2022-23) even after imposition of 20% export duty,” the Centre said adding that in 2023-24, about 15.54 LMT of this variety of rice was exported against only 11.55 LMT during in 2022-23, an increase by 35%. “This sharp increase in exports can be ascribed to high international prices due to geo-political scenario, El Nino sentiments and extreme climatic conditions in other rice-producing countries, etc,” the Ministry said.

The Ministry added that there was no change in the export policy of non-basmati rice (par boiled rice) and basmati rice, which forms the bulk of rice exports. “This will ensure that the farmers continue to get the benefit of remunerative prices in the international market,” the Ministry added.