Pak players gain from India`s export tax on basmati

India’s basmati rice producers have started to lose their export markets to Pakistani players, who enjoy a price advantage of $400 a tonne over them. The price advantage is mainly due to the tax of $200 on Indian exports and factors such as lower production cost in Pakistan.

The Indian basmati rice exports have seen a slowdown since July due to hesitation shown by major buyers such as Saudi Arabia and Iran to purchase at high prices.

“Our customers are not comfortable buying at high prices, which include the $200 a tonne export tax. Customers have shifted to Pakistani basmati, primarily because of the tax levied by the government. Our exports have seen a drop of 30-40 per cent since the tax was imposed,” said Gurnam Arora, joint managing director, Kohinoor Foods, which sells rice under the ‘Kohinoor’ brand.

The government had imposed a tax of Rs 8,000 a tonne on basmati rice exports on April 29. The country exported 1.18 million tonnes of basmati in 2007-08, worth Rs 4,334 crore.

“While the Indian exports are witnessing a slowdown, exports from Pakistan are doing well. Though prices have softened from $2,000 to $1,700 a tonne since June, there are no buyers,” said Anil Mittal, chairman and managing director, KRBL, which sells basmati under the ‘India Gate’ brand.

Industry players said the export tax would impact farmers when they begin harvesting paddy in September. Millers plan to adjust the Rs 8,000 a tonne export tax from the price they pay to farmers for the paddy.

“I will be factoring in the Rs 8,000 tonne export duty when I start buying paddy. I am not going to incur this loss of Rs 8 on each kg of rice I export,” added Mittal.

According to industry estimates, basmati paddy acreage is estimated to be up by 15-20 per cent over last year as farmers had received high prices last year.

“The export tax on Basmati is effectively subsidising the rich upper class at the cost of farmers and trade by depressing Basmati prices in India. It is now time to allow farmers and the trade to take advantage of the international market by lifting the tax,” said R S Seshadri, director, Tilda Riceland.