Bumper basmati crop not good news for exporters

The bumper production of basmati rice in the major producing belt (Punjab, Haryana and Western Uttar Pardesh) has undermined the bargaining power of basmati exporters, as they face payment hurdles from buyers in Iran and West Asia.

The recognition of PUSA 1121, as one of the basmati variety in November, 2008, has helped in the higher production.

According to Gaurav Bhatia, secretary, All India Rice Exporters Association and director DD International Private Limited, the high yield and low irrigation requirement of PUSA 1121 has encouraged many farmers to adopt this crop. The variety became popular in the export market in a short-span but its over-supply has affected the bargaining power of exporters.
 

RICE EXPORTS
Year	Quantity  (In tonnes)		Value (In Rs cr)
	Basmati	Non- Basmati	Basmati	Non- Basmati
2008-09	15,56,383	1,691.42	9,476.85	1,691.42
2009-10	20,15,912	414.76	10,838.86	414.76
2010-2011 (Jan)	18,22,730	-

8,760.89

N.A.

Source: All India Rice Exporters Association

“Due to the huge stocks available with exporters, everybody is keen for early shipments, rendering flexibility in the mode of payments. Instead of seeking 10-15 per cent of the amount as advance payments, the exporters now resort to a credit period of 120 days. Since the margins in commodities are thin, this affects the viability,” he said.

Ashwani Arora, joint managing director, LT Foods, says there has been a steady annual growth of demand of 10 per cent in the global market but the prices are stressed. He says Iran is the largest buyer of rice from India, but its strained relations with the US has affected the banking activities there.

The delayed payment from Iran has put exporters in a catch-22 situation. Weakening of the Iranian currency and strengthening of the rupee has also compressed margins of exporters, he added.

L T Foods, which registered a turnover of Rs 1,050 crore last year and is eying a business of Rs 1,250 crore this year, said exports contribute 50 per cent to the total business.

Some of the players are scouting for the parallel markets in Brazil, Mexico and Argentina. “These markets can offer volumes but there are some entry-level barriers. We are planning road shows in these countries to reach out to the local channel partners to market our produce as an alternate to the existing markets,” said one of the exporters.

The price of rice in the global market, according to exporters, has dropped from Rs 2,500 a quintal to about Rs 1,800 a quintal in the last three years. They may have been a tough going this year but they are gearing up for innovative marketing strategies to either enter new markets or launch their retail brands to make inroads in the domestic market.