Indian rice exports face threat from Asian peers, including Pakistan

Lack of long term export policy, high costs making Indian rice uncompetitive

Rice exporters continue to face threat from Asian peers, such as Pakistan and Thailand, even as domestic paddy output in 2018-19 kharif season is estimated to grow 2.5 per cent to more than 115 million tonnes.
 
The lack of a long-term rice export policy coupled with successive increase in procurement costs under the minimum support price (MSP) mechanism have made rice exports, especially non-basmati, uncompetitive.
 
Over the past few years, Pakistan, Thailand and Vietnam have emerged as strong players in the Asian and African regions.
 
India is expected to see a drop in non-basmati rice exports this year even as the export of basmati rice is pegged to grow, though at a slower rate.
 
In such a challenging scenario, Egypt, China, Mexico, Malaysia, Indonesia and the Philippines could be the potential new destinations for Indian rice, according to a market update by Cogoport, India’s leading online logistics marketplace.
 
According to a report, global rice production is expected to decline, as the forecast for crops in the US, North Korea and Thailand is lower.
 
“The MSP of rice has been going up, which is making rice exports price uncompetitive vis-à-vis shipments from Vietnam, Thailand and Pakistan,” Mumbai-based rice trader Devendra Vora told Business Standard.

He said the lack of a proper policy framework was to be blamed for impeding the high growth potential of rice exports, although domestic paddy production has continued to increase every year apart from the central government maintaining robust food grain stockpile for public distribution system and food security reasons.
 
Apart from growing competition from high-quality yet cheaper rice of Pakistani and Thai origin, liquidity was an issue as sometimes payments take months to materialise, said Rajputana Rice Chief Executive Officer Nikhil Singh in the Cogoport report. Rajputana ships 100 rice containers to West Africa every month.
 
Saya Overseas earlier shipped 60-70 rice containers every month to the African and Gulf countries, it is now down to 40-50. “The economy is slowing down and there is tough competition from other countries. Pakistan, Thailand and Vietnam are offering better rates. There are losses because of defaulters too,” the report mentions Saya CEO Vishal Agrawal as saying.
 
Meanwhile, Cogoport cofounder and head of growth Kunal Rathod said Indian exporters face stiffer competition as China had turned into a low-cost rice exporter, while higher tariffs on non-basmati rice threatened India’s chances to export to Bangladesh.
 
He suggested Indian exporters explore new markets such as Mexico, which is now relying less on supplies from the US. “Countries like Egypt where availability of affordable Asian rice can fill tight domestic supply gaps could also be potential new markets, whereas countries like China, Malaysia, Indonesia and the Philippines continue to be major rice importers and can be targeted.”
 
According to Rice Exporters Association Vice-President Rakesh Kumar Singh, although India was a strong player in rice exports to West Africa, the country should target new markets like China, Malaysia and the Philippines. To avoid payment challenges, exporters should insist on 10-20 per cent advance, since some upfront money would desist the buyer from defaults, he added.