High Rupee May Hurt Basmati Exports .

NEW DELHI   India's basmati rice exports in the current fiscal year through March 2011 are likely to fall between 5% and 7% from last year, as a rise in the rupee's value to the dollar has increased the export price, industry officials said.

The stronger currency, which rose 4.6% since Aug.1, has dashed India's hopes that it will be able to increase its rice export this year.

Recent estimates suggest that Pakistan - India's main competitor in the industry - could export more basmati rice this year than expected. The damage to Pakistan's premium basmati rice crops has been relatively small, since it was regions with crops of common grade rice that were worst hit by the floods. Last month Pakistan industry officials estimated a rise in basmati exports by about 100,000 tons to 1.2 million tons this year.

India basmati exporters, who expected to benefit from Pakistan's loss, will have to fight for overseas market share. Besides, the rising rupee will make exports from India more costly.

"India has got priced out of the market (because of the rupee's rise)," said Director R.S. Seshadri of top basmati rice exporter Tilda Riceland

Indian traders had exported about 2.1 million-2.2 million metric tons of basmati in 2009-10, according to industry estimates.

India's basmati production in 2010-11 is expected to remain unchanged at the previous year's level of 4.5 million tons.

Registration of export contracts with the government have dropped by nearly 12% between April and September to 1.42 million tons, compared to 1.61 million tons a year earlier.

India, the world's largest basmati grower and exporter, currently allows basmati exports with a floor price of $900 per metric ton, while non-basmati rice shipments are banned. The country exports mostly to the United Arab Emirates, Saudi Arabia, Iran and the U.K.

According to industry officials, the average price at which Indian basmati exports have been signed is around $1,050-$1,100 per metric ton, about 12% higher than the price being offered by exporters from Pakistan.

High basmati paddy prices have prevented exporters from reducing prices and competing with lower-priced Pakistan varieties. Industry officials said Pusa 1121 paddy, a popular basmati variety, is being sold by Indian farmers at about a 12% premium compared to last year, at about 24,500 rupees ($552) per ton.

"In this scenario, there is hardly any parity for Indian basmati exports," said Gurnam Arora, director of Kohinoor Foods Ltd.

Source : online.wsj.com