After almost 20 years, non-basmati rice import has been authorised last week on the government account. Imports on the private account are not commercially viable. The first tranche of government-sponsored import tenders of 30, 000 mt rice are opening soon. And market reports are projecting import of 3-4 million tonnes in the coming year.
This reflects a visionary approach on the government’s part to pre-empt an immediate or long-term shortfall in domestic paddy/rice production. In these days of climate change, the weather can prove to be a rude shock for production estimates. Given that, the theoretical projection of sufficiency of supply in India (85 mt production+15mt carry-over) can prove to be lesser than the demand pull (of 93mt), leading to food security issues. The government has rightly decided to err on side of caution. The premise is simple: it is no use speculating whether next year’s paddy crop will be inadequate or abundant, but be prepared.
India’s entry into the world market has been marked with speed and surprise. Before India presses the accelerator, other nations/governments/traders abroad will attempt to promptly cover their requirements. Larger demand on an immediate basis has already emerged from major importers like Philippines, Iraq and Japan, as they would like to buy (but will not be able to) their requirements at current price levels (around $400/mt fob for 25% broken white rice of Thai and Vietnamese origin and $340 for the Pakistani variety). Prices are likely to spike by 25-50% — $75 to $150 pmt or even more — when subsequent tenders are issued by Indian PSUs.
Only 30 mt of rice is traded worldwide and that includes six mt of Basmati rice exported both by India and Pakistan. Net availability of non-basmati rice is 24 mt. If the Philippines and India together secure six mt in 2010, that would account for 25% of traded rice, which makes for a very bullish price signal. Indeed, rice markets are ablaze as suppliers in Thailand and Vietnam have effectively stopped quoting prices. All producers (Vietnam, Thailand, Myanmar and Pakistan) will hold back their stocks for higher price realisation, with traders and buying nations frantically chasing them.
Thus, rice inflation is on the cards globally. But Indian domestic prices will remain stable to firm as the government has taken advance action to curb speculative interest and will also subsidise imported cargoes. India might review its rice requirements after July-Aug 2010 depending upon the intensity of monsoons. That might also mean a decline in international prices if India curtails its import demand after August 2010.
Source : The Economic Times