Quality of products, pushy promotional strategies and strongly visible branding are the lifeblood of a better future for Indian exporters who wish to reap long-term benefits and compete in Europe. Exporters able to maintain high standards on all fronts "" enough to live up to EU standards "" alone will have a bright future in the EU. This will help them develop a permanent market and establish themselves as permanent branded suppliers, opined Rashmi Bhimjiyani, chairman and managing director of R T Exports Ltd, and vice president of All India Rice Exporters Association (AIREA) in an interview with Devendra Vyas. Excerpts:
BS: What is the basmati crop situation this year as compared to the last year?
Rashmi Bhimjiyani: Basmati is grown in the northern part of India (Haryana, Punjab, Uttar Pradesh and partly in Rajasthan). This year basmati rice crop is excellent compared to last year due to timely rain all over the basmati growing areas. Last year, basmati growers fetched remunerative prices for paddy. This encouraged them to allot larger areas to production of paddy.
Indian basmati rice export is increasing steadily. Hitherto, it was primarily consumed in the Asian and Middle East nations, but in the last couple of years Indian basmati rice has gained popularity in Europe and America.
Of the total Indian basmati production, 60 per cent is exported to the Middle East, mostly to Saudi Arabia. Till date, Saudi Arabia used to import part of their parboiled basmati from Pakistan. However, the Rice Export Corporation of Pakistan (RECP), which was the major manufacturer of parboiled basmati, no longer exists. As a result, the demand for Indian parboiled basmati has risen.
BS: Would the recent devaluation of Indian rupee help basmati exports? How?
RB: The Indian currency was steady as compared to South East Asia and Pakistan, which are Indias major competitors in export of basmati. The Indian rupee was ruling around 36 a dollar as against Pakistans currency which logged at Rs 44 a dollar. After the Pakistan government agency RECP was scrapped, basmati rice export in Pakistan was privatised. Due to this, India faced competition from private exporters from Pakistan who were using the currency disparity to their advantage.
The recent devaluation of the Indian currency has improved the position of Indian exporters against Pakistani exporters. However, the local prices of basmati paddy have increased 30 to 35 per cent in the last 6-8 weeks as compared to the devaluation of 12 per cent.This has put the Indian exporters in a dilemma.
BS: How do you see the export scenario of basmati rice in 1997-98?
RB: The demand growth rate of basmati rice is around 12 to 15 per cent per annum.The Indian production is not increasing drastically, but the consumption of basmati rice in US and Europe has increased considerably. These countries are ready to pay a better price than Saudi Arabia. This has led to a shift in the export of premium quality from Saudi Arabia to Europe and the US.
Basmati rice is marketed in the US and Europe in smaller packs of 500 grammes to 2 kg. This makes it affordable for a larger segment of the population. As compared to this, in Saudi Arabia markets basmati rice is sold in the packings of 20 kg to 45 kg, which makes it affordable only for higher income groups. Also, the larger consumer base for basmati rice in Europe and US (approx 500 million) as compared to Saudi Arabias 15 million will lead to a greater demand for basmati rice in the future.
Basmati rice is also being popularised by multinationals who are marketing value-added products like basmati rice flakes, instant rice, ready-to-cook basmati pulao, etc.
BS: What should be done to increase basmati rice production in India?
RB: Currently Indian paddy production is 121.3 million tonne. Of this basmati paddy production is less than 1%. All India Rice Exporters Association (AIREA) has made a presentation to the Agricultural Produce Export Development Authority (APEDA), to increase the production of basmati paddy by way of allotment of funds from the agricultural ministry for research in basmati paddy production, international standard pesticides, and better seed for a better yield. Also, loans should be given to farmers to buy pesticides and seeds and they should be educated via television and other media about new developments in basmati production.
The increase in the production of basmati will result in better foreign exchange earnings, more rural employment, upgradation of milling capacity to meet international quality standards, etc.
BS: What is the current price situation of basmati rice in the domestic as well as in the international market? How do you see it in the days ahead?
RB: Indian basmati has virtually no competitor other than Pakistan, which enables it to enjoy a monopoly in the basmati rice market. Till date, Indian exporters have not been able to exploit the market upto the full strength, as our policy was more or less closed door. Due to liberalisation, the scenario has changed. Indian millers as well as exporters of basmati rice have imported machinery that can meet international standards and have started branding their product in the international market. They have opened branches in foreign countries. This will help them reach household consumers in Europe and America, too.
This year basmati production is almost 10 to 12 per cent higher than last year. Since Indian basmati is gradually becoming popular the world over, with virtually no competition in parboiled basmati from Pakistan, we see an upward trend from April. Due to the preference of certain segments of the American and Middle East markets for aged rice, exporters with larger holding capacity will be able to fetch better prices in the long run as compared to small millers in India.
Due to exceptional increase in demand of basmati rice last year, basmati importers throughout the world have a low inventory level. Basmati importers will have to build up minimum inventory levels to meet fresh demand. This will lead to the upward trend in basmati rice prices.
Basmati prices in the local market will remain stronger because of devaluation of the Indian currency by 28-30% in the last two years. Also, since basmati rice is primarily an export item with local consumption of 10-12% of total production, local demand and supply have very little impact on prices of basmati rice.
BS: What are the emerging trends in basmati rice in the coming days?
RB: The recent political changes in East Europe and due to the bilateral trade agreement with various East European countries, have led to the emergence of the upper class and subsequently increased the demand for basmati rice in these countries.
Till date we did not have much of a trade with South Africa. After president Mandela came to power our trade agreement with South Africa has normalised.
BS: How do you see the post-GATT scenario in basmati rice?
RB: The GATT agreement has given a tremendous advantage to the Indian rice exporters as compared to US, Thailand and Vietnam. The EU exempts brown (unpolished) basmati rice from various duties. This has made Indian rice more popular throughout the EU.
Indian exporters should maintain quality for long-term benefits. Those who maintain quality as per EU standards along with their branding and other promotional activities will have a better future in the EU. This will help us develop a permanent market and establish us as branded suppliers
Basmati is a unique product of India with no multinational threat. Today, Indian basmati rice exporters and manufacturers have a tremendous advantage to penetrate the world market by keeping in mind Total Quality Management (TQM) by meeting world standards. This will earn them a reputation which will benefit the country and the exporting community.