Export duty may hurt basmati farmers

Basmati paddy farmers' dream of a better realisation is likely to take a hard knock following a levy on exports of the rice, a premium foodgrain enjoying a 53 per cent global market share.

With the government levying $200 (Rs 8,000) a tonne duty on basmati rice exports, farmers growing the crop are likely to lose Rs 12,800 an acre.

According to trade sources, farmers' average income doubled in the last two years from Rs 18,500 in 2005 to Rs 36,500 an acre in 2007. Their income was likely to increase this year too because of higher prices of the rice overseas.

"Farmers' income is bound to be squeezed as they will have to bear the additional cost levied by the government. the trade fraternity is going to pass on the duty to farmers," said Anil Mittal, chief mentor, Basmati Rice Farmers and Exporters Development Forum.

The government has cut the minimum export price (MEP) of basmati to $1,000 a tonne from $1,200 a tonne to discourage exports of the premium quality rice.

"We have requested the government to bring back MEP to the level of $1,200 and roll back the export duty as the decision has created uncertainty in the overseas market. It has also changed the sentiment of farmers, who may not be willing to sow basmati paddy next year," said Vijay Setia, president, All India Rice Exporters Association.

Basmati is likely to lose some acreage to other commodities. Besides, Pakistan is also likely to take away India's share in the export marklet.

According to an estimate, approximately 8 lakh farmers are likely to be hit badly with the government's decision.

The last season witnessed paddy prices rising from Rs 25 a kg in the beginning of the season (September 2007) to Rs 33 a kg towards the end (January 2008).

In 2006-07, basmati rice exports fetched Rs 3,064 crore and farmers realised Rs 2,298 crore. India exported around 1.06 million tonnes of the rice that year.

India produces about 94 million tonnes of rice annually, of which basmati consists of 1.5 million tonnes.

Basmati rice constitutes 6.12 per cent of the total export of agricultural commodities and is priced about 2.5 times more than the non-basmati rice.

Saudi Arabia is the largest export destination of basmati rice from India.