The Indian rice export ban

Sending global rice markets into a tizzy

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Indians
The government says it was forced to take that decision in a bid to soften the prices of rice and ensure adequate availability in the upcoming festival season. PC GreatAndhra.com

Visuals of people – mainly Indians – lining up in stores in the US with dozens of bags of rice went viral toward the last week of July. The trigger of the panic buying: a ban on the export of non-Basmati white rice imposed by the Indian government on 20 July 2023. The government says it was forced to take that decision in a bid to soften the prices of rice and ensure adequate availability in the upcoming festival season. It is also seen as a measure to stem any possible short-supply as excessive rain in some places and deficient rain elsewhere either battered paddy crops or affected sowing.

Parboiled and basmati rice, which the government says form the bulk of the exports, however, can still be sent abroad. Non-Basmati white rice constitutes about 25% of the total rice exports from India. The government argues that it was left with no option as the retail prices of rice increased by 11.5% over a year and by 3% over the past month.

The imposition of a 20% export duty on non-Basmati white rice last year failed to make any impact and rice exports increased by 35%, which can be attributed to high international prices due to geo-political scenarios, El Nino sentiments, and extreme climatic conditions in other rice-producing countries, the government said in a statement. In FY 2023-24 (April-June), about 15.54 LMT of this variety of rice was exported compared to 11.55 LMT during the same period in FY 2022-23, the government said.

The decision, apart from triggering panic among non-resident Indians, sent alarm bells ringing among countries dependent on Indian rice, including the Philippines, Malaysia, and Vietnam in Southeast Asia and Nigeria, Ivory Coast, and Senegal in West Africa, CNN quoted Tanner Ehmke, lead economist for grains and oilseeds at CoBank, as saying. China is another major buyer.

The ban came as a blow to the global rice market, which was already wavering after last year’s floods in Pakistan, another major exporter of rice, disrupted supply. US rice producers tried to allay the fears of domestic consumers in the country, saying there was enough supply. India accounts for more than 40% of world rice exports. Various experts say India’s ban could send the global rice markets into a tizzy considering the rising prices globally and the looming El Nino conditions, which could affect rainfall patterns in rice-growing countries.

Devinder Sharma, an expert in agriculture policy in India, told BBC that “the government was trying to get ahead of an anticipated production shortfall, with rice-growing regions in the south also exposed to risks of dry rain as the El Nino weather pattern sweeps through later this year.” Others say it could affect global food security as in some African countries India’s market share in rice imports surpasses 80%. Shirley Mustafa, a rice market analyst at the UN’s Food and Agriculture Organisation (FAO), told BBC’s Soutik Biswas, “These bans hurt the vulnerable people most because they dedicate a larger share of their incomes to buying food.”

In a hard-hitting editorial in Business Standard, TN Ninan terms the govt intervention in markets as a “new bureaucratic nightmare”. “Another recent example of this approach is the ban on the export of non-basmati white rice, though the country has stocks well in excess of buffer stock requirements. The objectives are again unexceptionable: Arrest inflation and avoid shortages.” Ninan says “The economic tool to use would have been increase in supply, by releasing rice from government godowns. Instead, the administrative recourse is an export ban. In the process, India has done no good to its international reputation as a reliable supplier in a global rice market, where it is the largest exporter.”

Many like Ninan argue that the government could well make use of the staggering stockpile of rice lying in public granaries. A Reuters report on August 3 quoting government sources said Indian rice stocks, including unmilled husk varieties at state warehouses, totaled 37.6 million metric tons on August 1, three times its target – raising the hopes of a relaxation in the export ban, which would come as a life-saver for millions of hungry mouths waiting for that one morsel of food.

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