An avoidable ban

Restrictions on rice exports can be counterproductive

The government’s decision to ban the export of all types of rice, barring Basmati and parboiled rice, seems to have been influenced by the political exigencies to protect domestic supplies and prices ahead of the impending Assembly polls in some key states and the Lok Sabha elections next year, but its repercussions have been felt globally. International rice prices, ruling at their highest level in 11 years, have begun to escalate further. In some cases, the prices of cargo in transit have also been hiked by $50-100 a tonne. India, of late, emerged as the world’s leading rice exporter, accounting for nearly 40 per cent of global trade. It shipped out a record 22.3 million tonnes in 2022-23. Its sudden withdrawal from the market has curtailed global supplies by around 10 million tonnes.

The other major exporters of non-scented rice, notably Thailand and Vietnam, do not have adequate inventories to fill this gap. Consequently, international prices of food, already on the upward trajectory due to weather-driven harvest uncertainties in several countries and the Russian U-turn on permission to Ukraine to ship out grains from Black Sea ports, seem set to scale a new high. This would exacerbate the woes of food-deficit countries, especially small African nations, which rely heavily on shipments from India. Unsurprisingly, therefore, a senior official of the International Monetary Fund has assailed the export prohibition by India, pointing out that it might worsen global food price volatility, and has called for its revocation. At home too, the government’s move is generally being viewed as imprudent. There are several reasons for that. For one, it amounts to losing an opportunity to capitalise on the lucrative global prices. Besides, it might prove counterproductive by disincentivising farmers from expanding paddy acreage and investing in yield-boosting farm inputs. And, more importantly, it would dent India’s image as a reliable supplier of food grains and a trustworthy trade partner.

This apart, the reasons put forth by the government for curbing exports of foodgrains, as also for other retrograde steps like imposing stockholding limits on several essential food items, cut no ice. No doubt, the domestic prices of rice have risen by some 11.5 per cent over a year, but part of this spike is attributable to the hike in the minimum support price. There has, indeed, been no shortage of this staple cereal in local markets. Similarly, though the overall grain stockpile of the Food Corporation of India has dipped sharply, the rice inventory is still around 41 million tonnes, more than three times the buffer stocking norm of 13.54 million tonnes. This is more than sufficient to meet the government’s requirement of 36-38 million tonnes for the public distribution system.

Moreover, the apprehensions that emerging El Nino might adversely affect monsoon precipitation and paddy sowing in the current kharif season have also ebbed considerably. Cumulative countrywide monsoon rain has so far been above normal and paddy sowing is apace even in the regions where it had lagged behind last year’s corresponding level in the initial part of the current rainy season. It would, therefore, be advisable for the government to refrain from knee-jerk responses to market dynamics and ensure the much-needed stability in domestic and external grain trade policies.