Centre imposes 20% export duty on non-Basmati rice from September 9

The central government on Thursday imposed a 20 per cent export duty on select rice varieties, excluding parboiled and Basmati rice. This comes at a time when paddy sowing continues to remain low due to drought in several major rice-growing states.

Trade and market sources said the varieties on which duty has been imposed command a share of around 5.9 million tonnes (mt) of rice exported of the total 21-22 mt (28-30 per cent) of annual exports.

The total also includes 3-4 mt of Basmati rice that has been kept outside the purview of any export tax.

The imposition of export tax has fuelled debate on whether the Centre will reach a decision on further extending the free foodgrain distribution scheme - Pradhan Mantri Garib Kalyan Anna Yojana - beyond September.

The scheme to distribute 5 kilograms of rice or wheat per person per month to nearly 800 million beneficiaries of the National Food Security Act over and above their regular monthly quota was started during the pandemic as a welfare move.

Since then, the scheme has been extended six times - the latest being in April for six months.

So far, most rice varieties did not invite any export tax. This made domestic varieties cheaper than most global brands, leading to a surge in demand.

The price of rice variants has risen 6-20 per cent in major markets across the country due to drop in acreage, stoking fears of a 6-10 mt fall in kharif production this year, compared to last year.

In 2021, India produced around 111 mt of rice in the kharif season.

“Not restricting parboiled rice is a conscious decision to protect food security of least developed nations. The raw rice (Ponni) or other specialty raw rice is consumed by Indians abroad. Perhaps the government may need to consider a strategy to protect this segment. The Chinese rice crop will arrive in October. The likely shortfall in Chinese crop will neutralise our export duty and bring in equilibrium,” said S Chandrasekaran, leading trade policy analyst and author of Basmati Rice: The Natural History Geographical Indication.

Rahul Chauhan, commodity analyst at iGrain India, said that domestic rice prices won’t drop much since major exportable varieties have been kept outside the purview of the duty hike.

On the sowing front, the acreage of paddy was around 6 per cent less (as on September 2) than the acreage during the same period last year. So far, around 96.5 per cent of the normal area has been covered.

Normal area is the average acreage of the past five years. In the case of paddy in the kharif season, the normal area is 39.7 million hectares.

Given that much of the sowing has happened outside the ideal window and monsoon continues to play truant over Eastern states of Jharkhand, Bihar, Uttar Pradesh, and West Bengal, there is a great deal of uncertainty over the final output.

In some states like Jharkhand, the sowing is still woefully low and has reached just 50 per cent of the normal area until September 2. 

Rice stocks in the central pool as on August 16 were around 26.35 mt, while the buffer on October 1 should have been around 10.25 mt. These stocks do not include 12.24 mt of unmilled paddy lying with millers.