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Rice exports from India witnesses a downward trend owing to elections

India is the world's largest rice exporter and in 2017, it had accounted for 25% of the global rice trade valued at US$ 7.73 billion, primarily due to its competitive cost advantage

Virendra Singh Rawat  |  Lucknow 

A rice trader waits for customers at a market in the Bangladesh capital Dhaka

Belying expectations of upswing, the rice exports from India have witnessed a downward trend owing to elections that took place in some states and upcoming general elections apart from global geopolitical factors in the ongoing season.

While global factors pertain to recessionary trends in key export markets and persisting payments issue with Iran, the domestic factors include among others, big traders avoiding taking long positions due to impending Lok Sabha election in the early months of 2019, as a caution before the results could reflect in amended export terms with any change in political equations.

India is the world’s largest rice exporter and in 2017, it had accounted for 25% of the global rice trade valued at US$ 7.73 billion, primarily due to its competitive cost advantage. India’s net rice exports touched 12.7 million tonnes (MT) last year. Basmati exports had stood at about 4 MT with almost 80% of the consignment going to the Gulf countries, including

The decline started from August this year ahead of state elections. Although arrival of new season crop was also awaited. And during april-November 2018, exports of basmati and non-basmati are down 6 per cent to $4.67 bn. All the fall has been attributed to lower exports of non-basmati rice.

Rice exports from India witnesses a downward trend owing to elections

Devendra Vora of Friendship Traders, New Bombay based rice exporter, told Business Standard that the state elections that ended and coming 2019 Lok Sabha poll has been a major reason for the “big players” shying away from holding long positions in domestic market for export related procurements since a change in political equations could bring radical changes in export policies.

Owing to basmati crop loss coupled with higher purchase price, the net availability of the crop for exports was on the lower side but realised value has improved while non-basmati exports have fallen in quantity and even realisation was lower. Vpora said that, “the recessionary trend in export markets, including and Europe contributed to weaker sentiments. Environment in market has been comparatively subdued than last year due to several factors, including low international demand and higher purchase price in India resulting lower viability, which dented the cost competitiveness to some extent,” Vora added.

In the past, the change of government brought about export ban on staple food grains, which caused economic loss to exporters holding large inventories meant for exports. “At the same time, the banks have become jittery about extending credit to exporters due to stricter norms. This has resulted in complex paper works and delays, which has also affected trade,” a north India based exporter said.

Drip Capital, a US-based trade finance company, in its research report ‘Rice Commodity Insights’ outlining the evolving dynamics in the Indian market in 2018, forecast the current decline in rice exports was part of a regular annual cycle.

“There is little need for panic, as demand and export volumes should rise into 2019,” the report said.

The lingering process of payment terms with has played its part in pulling down rice exports. Iran’s annual basmati import market is pegged at almost a MT.

“The Iran market is still to open to potential, since their payment norms are not clear yet and are in the process of being finalised,” Kohinoor Foods joint managing director Gurnam Arora said. Iran, which had been facing wide ranging US sanctions, was allowed barter deals and trade valued in Rupee terms.

Commenting on the China market, Arora said exporters were getting enquiries from China, mainly for long grain rice and that the country would take some more time to become a major export destination.

“We need to explore the China market with roadshows and exhibitions before it attains scale in the next 1-2 years,” he added. A few months back, a buyer-seller meet was organised in China, where some Indian rice exporters had participated, while the Dragon has approved about two dozen domestic rice millers for the purpose.

First Published: Sat, December 29 2018. 12:18 IST
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