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India has raised the minimum export price for non-basmati rice to $1,000 per tonne free on board to protect domestic supplies as inflation rose to a near-14 month high and global prices of the grain continue to surge. Analysts said the revision would effectively end exports of all but the highest quality grades, which have niche markets.
"The government's move is aimed at a complete halt of non-basmati rice exports," said Prem Garg, managing director of Lal Mahal Group, a leading rice exporter. Rising food prices have been a major trigger for India's widely watched wholesale price inflation, which surged to an annual 6.68 percent in mid March, posing a major policy challenge at a time when economic growth is slowing.
India has scrapped tax incentives for exporters of steel and cement to try and tame price pressures in Asia's third-largest economy, and last week cut import duties on key edible oils. "The government is concerned about domestic supplies," Vijay Sethia, president of the All India Rice Exporters' Association, said on Friday. "There is no shortage of rice in India, but any scarcity in global markets will lead to higher exports."
The Directorate General of Foreign Trade, an arm of the commerce ministry, said on in a March 27 statement on its Web site - www.dgft.delhi.nic.in - that the floor price for non-basmati exports has been raised to 40,000 rupees or $1,000 a tonne from $650.India had banned exports of all non-basmati rice on October 9, but two weeks later relented to protests from traders and allowed sales at a floor price of $425 a tonne.
In December, that was raised to $500, with a further revision earlier this month taking it to $650. Trade officials believe India will export 5.5 million tonnes of rice in the year to March 31, 2008, up from 3.8 million tonnes last year but said the new restrictions have tempered sales.
"India had already exported around 4 million tonnes between April to early October, when the government banned exports of all non-basmati rice. Had curbs been not imposed, exports would have been much, much higher." India normally exports four million tonnes of rice annually, including one million tonnes of aromatic basmati rice, which is exclusively grown in the northern states of India and Pakistan.
Sethia said rice prices in Thailand, the world's biggest exporter, have surged to $720 per tonne from $400 a tonne in the last six months as crop failure in the Philippines and Bangladesh stoked fears of a global shortage. Thailand is forecast to produce around 6.5 million tonnes of paddy in the second 2007/08 crop, according to the country's Farm Ministry data.

Copyright Reuters, 2008

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