Rice stocks surged by up to 16 per cent on Thursday on the back of the government’s decision to allow basmati exports without the barrier of minimum export price (MEP).
Fixed by the government, MEP is the benchmark price below which an exporter cannot sign a contract with foreign buyers. The Directorate General of Foreign Trade (DGFT), through a notification yesterday, announced the removal of MEP, which was received by exporters positively.
While the share price of Kohinoor Foods Ltd jumped 14.41 per cent to close at Rs 32.15 that of LT Food Ltd shot up 9.64 per cent to Rs 43.80. Also, KRBL Ltd stock price jumped 7.75 per cent to close at Rs 22.25 on the BSE. Non-basmati rice exporters saw similar jump in stock prices.
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Rice exporters anticipate a huge surge in their realisation on the growing global demand for the Indian variety. Especially with the Chinese government’s decision to import basmati from India, the staple food is expected to fetch higher premium.
“For that, however, India would have to change the strategy and do proper marketing. Basmati rice of similar quality originating from Thailand fetches $1,100-1,200 a tonne in the export market, while the same of Indian origin attracts $950-1,000 a tonne. Hence, Indian exporters need to do immense effort to fetch realisation at par with Thai suppliers,” said Vijay Setia, former president of All India Rice Exporters’ Association.
Global demand, however, is robust. Hence, prices are likely to remain firm. With an estimated annual production at 7.5 million tonnes (mt), India has 70 per cent of the global basmati export market.
India’s basmati exports are likely to jump 30 per cent this financial year on the government’s decision to remove MEP. Total exports shot up 20 per cent to three mt during 2011-12, compared with 2.4 mt in the previous year.
The growing foreign demand and China’s interest in importing from India would create competition. Since the production quantity remains almost stagnant and the chances of inclusion of the non-basmati variety of higher quality are minimal, the growing foreign demand is expected to prove beneficial for exporters.
“Overall, exports of basmati rice will go up at least by 30 per cent,” said Gurnam Arora, joint managing director of the Kohinoor Foods Ltd, the producer and exporter of Kohinoor brand.
The demand for Indian basmati has been fairly good in Iran, Iraq, Saudi Arabia, Europe and the US, despite unfavourable global economic conditions. India’s basmati, especially the Pusa 1121 variety, has been fetching a premium over the MEP. About two months ago, the government had cut MEP by $200 to $700 a tonne from $900 a tonne.
The delay in monsoon rainfall in major growing areas has hampered the sowing of paddy this season.
