Why not simplify rice exports? .

What is the current status of Indian rice exports? Is it permitted or prohibited? The answer is both — public sector units (PSUs) can export non-basmati rice (NBR) selectively, while private traders and exporters cannot.

Basmati rice (BR) varieties, including Pusa 1121, is permitted on OGL (open general licence) subject to MEP (minimum export price) being $900 fob. If BR exporters can handle complex markets of Iran and Saudi Arabia, why should NBR remain under the PSU domain?

Conditionalities

During March-May 2010, around 1,45,000 tonnes of NBR was authorised for exports via PSUs (STC/MMTC/PEC) to Sri Lanka, Nepal and Bangladesh; more such country-specific orders cannot be ruled out. These export notifications are linked and laced with conditions such as “direct” exports by PSUs, procurement of non-levy rice from “all over the country”, without any associate supplier in a manner that it does not disturb domestic prices.

The buyer in the recipient country will be intimated by the Ministry of External Affairs (MEA) in consultation with the importing nation concerned.

Landing certificate will have to be obtained from the importing entity by the PSUs. Contracts will be negotiated in terms of GATT provisions. This means that transactions in all respects will be commercial.

If rice to Nepal can be exported from border towns of UP or Bihar, and if parboiled rice is available from AP and Chhattisgarh and can be shipped from Kakinada or Vizag to Sri Lanka/Bangladesh, how can procurement from “all over the country” be economically justified?

Paper allocations

None can provide certification about non-disturbance of domestic prices attributable only to exports. These notified requirements can be subject to strict scrutiny that might deter PSUs from pursuing such exports. Such conditionalities mean de facto paper allocations, without any exports actually taking place. Last year also, two million tonnes of NBR was cleared for export to 21 African countries through PSUs. No exports were effected.

The recent trend of allowing exports for specific varieties of rice is rather disturbing. For Sri Lanka 20,000 tonnes of 25 per cent broken “Ponni Samba” variety is cleared, while the country itself is an exporter of “Ponni” rice; Bangladesh is to be offered only “parboiled rice” (PBR); South Africa has to be provided with 25 per cent broken rice — though it is well known that the South African market is 5 per cent parboiled rice.

All export notifications of NBR mention shipments of minimum 25 per cent broken rice. Why are other broken percentages (5, 10, 15, etc) banned? Why India has to be a shipper of cheap quality with lower value addition? In the absence of grain length and broken basis — half, two-thirds or three-fourths — such stipulations are meaningless.

Similarly, the MEP regime has more minuses than pluses. On paper, MEP may make sense, but accounting adjustments are possible.

If this trend continues, there could be future notifications for different varieties such as PR-106, IR8, IR64, 1001, etc., for NBR or Sugandha, Sharbati, Shabnam range for BR with varying degree of MEPs — leading to confusion. Blending of cheaper qualities with premium varieties cannot be ruled out either by accident or design.

The Customs can make the distinction and verify only going by what is stated in the surveyor's certification; and reports of two surveyors seldom match. Neither from the sellers nor the buyers point of view strict adherence to such a wide range of BR, NBR, PBR varieties can be ensured. The end result will be mutual recrimination and litigation.

Ideas of PSUs being the sole selling agencies of NBR, variety-specific discrimination and defining broken percentage were non-existent before 2007. Does it mean that all trade deals before 2007 were suspect? No, they were more orderly and transparent.

Will find its value

Approximately 26 million tonnes of NBR is with the FCI as of May 2010 and a crop of around 85 million tonnes is due by end-October, subject to good monsoon — rice exports may be opened up under OGL with overall limits of 4 million tonnes by March 2011 (both for BR and NBR).

Indian rice will find its own value — up or down — in the market depending on its competitiveness vis-à-vis Thailand, Vietnam and Pakistan. Indian exports of NBR may not exceed one million tonnes (mainly parboiled to Bangladesh, Nigeria and South Africa) and some quantities of Sharbati and PR 11 to the Middle East by the end of this year.

Rice exports need no subsidy. Shipments abroad will help create storage space for new crop, and improve the fortunes of the languishing PBR industry in AP, Chhattisgarh and Maharashtra. The Indian PBR markets in South Africa and Nigeria will be revived, where Thai rice has made deep inroads. Also, the intrinsic value realisation for all varieties will be achieved. Blending practices will be minimised and MEP will not discourage genuine exporters from aggressive trading.

Source : Business Line