The move is likely to slow down the export of one of India’s most sought-after, high-value export items.

The government has now deployed a full gamut of export restrictions on cereals on the back of high food inflation. (Vipin Kumar/HT photo)

The Union government has temporarily halted export of any basmati rice consignment being sold overseas for less than $1,200 a tonne, while shipments contracted above that price threshold will continue to be allowed, according to an order issued on Saturday.

The move is likely to slow down the export of one of India’s most sought-after, high-value export items. The country shipped basmati rice worth over $4.79 billion in 2022-2023, mostly to the Middle-East and the US.

Battling persistent high food prices, the world’s largest exporter of the grain banned the export of all grades of non-basmati white rice on July 20, sending global prices to a 12-year high, as measured by the Food and Agriculture Organisation’s (FAO) rice price index. The fresh curbs on basmati export are likely to accelerate global prices further.

A commerce ministry order reviewed by HT said the new regulations on basmati export comes after “credible information” that non-basmati rice was being shipped out using export provisions that apply to the aromatic basmati variety.

A letter from the commerce ministry to the Agriculture and Processed Food Products Export Development Authority (APEDA), a regulatory body, on August 26 imposed a set of conditions on basmati exports that could dent India’s export earnings. The letter states that all overseas basmati sale contracts with a “value of below $1,200 per metric tonne should be kept in abeyance”.

It further says that all such export contracts “may be evaluated by a committee set up by the chairman, APEDA”.

It is likely that these exports would be allowed only after scrutiny by a committee to be set up, as stated in the order.

Basmati export contracted above a price value of $1,200 per tonne are allowed to be exported as usual.

The government has now deployed a full gamut of export restrictions on cereals on the back of high food inflation, which rose a sharp 11% in July, as the overall consumer inflation rate accelerated to a 15-month high of 7.44%.

Traders alleged that the new regulations in effect sets a minimum export price on basmati rice, a commodity whose exports are not usually curbed because it is a premium variety of cereal that is mostly exported.

“This will give an advantage to Pakistan, which also grows basmati,” a north Indian trader said on condition of anonymity.

This year, the government has focused on bolstering domestic food stocks due to concerns over an uneven monsoon that could be impacted by the El Nino weather pattern.

An El Nino, a global weather pattern marked by warmer ocean temperatures, often causes drought in the country by suppressing the monsoon, vital for Asia’s third-largest economy.

The fight to control cereal inflation has been two-pronged. One, the government has stopped or curbed exports, and two, it has been releasing stocks from state-held granaries.

Last week, the government imposed an export duty of 20% on parboiled rice.

On August 8, the Centre announced it would release 5 million tonnes of additional wheat and 2.5 million tonnes of rice through auctions.

The government has also decided to reduce the reserve price of rice, from ₹31 per kg to ₹29 per kg, to improve “offtake”, or quantities actually sold to traders.

“The current risk to food inflation emanates from excess rain damage to vegetables. Looking at current production trends, pulses are in a vulnerable position,” Dharmakirti Joshi, chief economist at Crisil Ltd, wrote in a recent research note.

Published Date: August 28, 2023