Centre imposes 20% export duty on parboiled rice; MEP on basmati rice

Till August 25, rice acreage in this kharif season was around 4.4% more than last year at 38.4 million

With paddy production under cloud due to excess rains in Punjab and Haryana and deficient showers in east India, the government in a late night notification clamped an export duty of 20 per cent on parboiled rice which will be applicable with immediate effect.

For parboiled rice exports for which have alreade entered the customs zone before August 25 and those which have irrevocable letters of credit, the duty will kick in from October 16, 2023. 

The department of commerce separately is believed to have also issued an order to impose a Minimum Export Price (MEP) of $1200 on basmati rice which will remain in force till October 15.

The MEP will be reviewed in the first week of October, the order said.

In other words, the parboiled rice export duty will kick in when the basmati rice MEP ends for the time being.

The move, traders and market players said, is meant to ensure that exports happen only after a clear picture on the kharif rice production emerges which is still in the fields and has faced moisture stress in many areas while floods in others.

Till August 25, rice acreage in this kharif season was around 4.4 per cent more than last year at 38.4 million.

Monsoon till August 25 is deficient by 7 per cent with East and North-East India that is a major rice growing area leading the shortfall by 18 per cent.

The current market price of basmati rice is around $1000-$1100 per tonne while that of common parboiled rice is around $460 per tonne.

India in FY23 India exported 17.8 million tonnes of non-basmati rice and 4.6 million tonnes of basmati rice.

Out of the non-basmati rice exports around 7.8-8 million tonnes was parboiled rice.

Globally, rice prices have shot up due to expected drop in production because of El Nino. Among countries, rice production in Asian countries is among the worst hit.

Rice prices in Thailand, which is India’s nearest competitor, rice prices have moved up by $50 per tonne in the last few months.

Myanmar, which is one of the leading exporters of raw rice, clamped down on exports a few days back.

India’s parboiled rice would have come into focus if raw rice goes out of the world markets.

In July 2023, the government banned the exports of non-basmati white rice that accounted for nearly 25-30 per cent of total rice exported from India with immediate effect.

Volume wise, India exported 6.5 million tonnes of this variety of non-basmati white rice in FY23, which was 5.3 million tonnes in FY22 (a rise of nearly 22 per cent)

The ban came against the backdrop of a 11.98 per cent year-on-year increase in rice inflation in June.

The government last year had imposed a duty of 20 per cent on all non-basmati rice exports to curb overseas shipments but it seems that it failed to curb the exports as international prices were very high.

Official data showed that despite the duty, the export of non-basmati white rice had increased to 4.21 million tonnes in September-March period of the 2022-23 from 3.36 million tonnes during September-March period of the previous fiscal.

S. Chandrasekaran, a leading trade policy analyst and author of the book “Basmati Rice: The Natural History Geographical Indication" said that currently paddy stock with millers are at all time low. 

Further, the El Niño is likely to reduce the arrival of paddy to an extent. Globally the rice market is in a bullish trend.

It is ready to absorb volume at higher prices.

“In this scenario, FCI is likely to face tough competition with private millers during procurement. Now the Government has undertaken a precautionary measure of imposing export duty on parboiled rice to balance food security, exports and fiscal allocation.  Current export duty on parboiled rice will minimise procurement competition to the FCI in order to cover its food security stock. Last year, the government imposed an export tax on raw rice with the intent of balancing act. Unfortunately, it had to prohibit raw rice exports due to higher domestic prices and exceeding levels of export volume.  The export duty on parboiled rice will exhibit its purpose based on current rupee behaviour, other rice export countries' policies and arbitrages, which are real-time factors,” Chandrasekaran said.