General Studies Paper 3

Context

• In a move to check domestic rice prices and ensure domestic food security, the Indian government has prohibited the export of white rice, levied a 20% export duty on par-boiled rice and permitted the export of Basmati rice.

Rice production estimate

• According to the third Advanced Estimate of the Department of Agriculture and Farmers Welfare, during the Rabi season 2022-2023, rice production was 13.8% less, during Rabi 2021-2022.
• Kharif sowing data show that rice is sown on 384.05 lakh hectares this year compared with 367.83 lakh hectares during the same period last year.
• But, in States such as Tamil Nadu where the Samba crop sowing starts usually in August in the Cauvery delta area, a section of farmers says there will be delayed sowing due to a shortfall in the south west monsoon.
• Trade and rice millers say that new season crop arrivals will start after the first week of September and that El Nino effects are likely to impact arrivals to some extent.

Rice exports

• India is the largest rice exporter globally with a 45% share in the world rice market.
• Overall rice exports in April-May of 2023 were 21.1% higher compared with the same period last financial year.
• Export of Basmati rice was 10.86% higher than its exports in May 2022. Non-Basmati rice shipments were 7.5% more, despite the government introducing a 20% export duty on white rice and prohibiting the export of broken rice last September.
• The shipment of non-Basmati rice has been on the rise for the last three years and the export of Basmati rice in 2022-2023 was higher than the previous year.
• The data shared by the government says that total rice exports (except broken rice) were 15% more against the 6.3 the corresponding period last year.
• Trade sources add that Thailand expects nearly 25% lower production in 2023-2024; Myanmar has stopped raw rice exports; and the crop is said to be hit in Iraq and Iran as well.

State of the farmers

• The government has increased the Minimum Support Price (MSP) for rice, and the paddy procured now by rice millers are at a price higher than the MSP.
• The prices will not decline for farmers. The restrictions on exports will ensure that there is no steep climb in rice prices in the market.
• When the benchmark price set by the government is high, the farmers will realise better prices, say trade sources.
• For domestic consumers, though there is a slight increase in rice prices at present, in the long run, availability is secured, and prices are not expected to spiral.

The overall situation

• Prices of Indian par-boiled rice in the international market is competitive even with the levy of a 20% duty.
• Countries such as Indonesia, which are rice exporters, are looking at imports (raw rice) now.
• When the global rice market is bullish, it will absorb volume in high prices too.
• The government should look at classifying rice as common rice and speciality rice for export policy decisions rather than classifying as Basmati and non-Basmati.
• As many as 12 varieties of rice have Geographical Indication (GI) recognition and these should be insulated from general market interventions.

Conclusion

• Since Indian rice quality and the consistency in supply is good, export demand for Indian rice went up. Basmati is a speciality rice and new crop arrivals will start soon and there is no need for restrictions.