Rice exporters in fear as move to hike MSP will make it expensive in global markets
Rice exporters, mainly of the non-basmati variety, are getting jittery as the talk of ensuring a higher minimum support price — 50 per cent over the cost of the production gains ground. They fear that any sharp increase in the MSP would push up the prices of the cereal to that extent making the Indian rice uncompetitive in the world market.
India is the largest exporter of the rice in the world. Shipments in the current financial year have already crossed 10 million tonnes (mt) for the April-January period and are poised to scale a new high, exporters said.
“We are not against the farmers getting a higher MSP. In fact, in the long run, a better price through an increase in MSP would encourage farmers to produce more and that, in turn, would make more grain available for exports benefiting the exporters,” an exporter said.
The government, while increasing the MSP for paddy, should keep the exporters’ interests in mind and formulate the policy accordingly or else it could lead to distortion in the market, trade sources said.
“The government can look at extending the price-deficit compensation scheme to paddy procurement so it does not carry on with the burden of maintaining the stocks while allowing exporters to purchase from the markets,” trade sources said.
Exporters said that a price increase of four to five per cent is manageable, but anything beyond that would make the Indian rice uncompetitive in the world market.
Moreover, bulk of the non-basmati exports are destined for countries in Africa and neighbours such as Bangladesh and Sri Lanka, which cannot afford any steep price increase, they said.
Bangladesh and Sri Lanka have resorted to higher imports from India this year due to a lower domestic crop.
Export market crucial
Trade sources said that for India, where rice production is seen scaling a new high of 111.01 mt in 2017-18, sustaining exports is crucial to maintain a healthy price trend in the domestic market.
A stable-to-bearish trend in domestic rice consumption estimated at between 85 and 90 mt annually over the past five years amidst rising production has helped India emerge as the largest exporter of the cereal in recent years.
Besides, a depleted stock level in main competitor Thailand has helped India gain market share. Over the past decade, India’s rice production has grown from around 93.36 million tonnes in 2006-07 to 109.70 mt in 2016-17.