FICCI asks for a price rollback on rice export

The Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Institute of Foreign Trade (IIFT) have condemned the government’s move to impose export duty and to decrease the Minimal Export Price (MEP) on Basmati rice for taming inflation. The trade institutes have asked the government for a price rollback on rice export in order to keep the competition alive in international market.

For restraining the spiralling prices on food grains, Finance Minister P Chidambaram had slapped the export duty of USD200 per tonne on Basmati rice and lowered the MEP from USD1200 to USD1000 per tonne. This move has discouraged the exporters while the total consumption of Basmati rice in India is very little.

The trade institute in a letter to Prime Minister Manmohan Singh has said that the decision of imposing export duty and lowering MEP would not affect the inflation rate, as the domestic consumption of Basmati rice is only 0.2% of the total rice consumption. India consumes annually nearby 89-million tonnes of rice. On the other hand, it would hurt marginal and small farmers as India would loss the worthwhile market of global rice and in that case neighbour Pakistan may get profit from the opportunity as being the close competitor in this sector.

“Besides directly affecting the farm income, it would rattle the confidence of importers in India’s export policy and might result in reduction of country’s share in global trade,” said Amit Mitra, the director general of FICCI in his letter to PM.

“Among the top priorities of the government is to raise farm income. The imposition of export tax it would, on the contrary, send negative signals that government is more interested in revenue collection rather than increasing the income of farmers,” it added.

India exported 1.06-million tonnes of basmati rice worth Rs 3,064 crore and farmers earned Rs 2,298 crore as their share in 2006-07. The average annual growth of basmati exports between 1991-92 and 2006-07 stood at 12 per cent and India captured 53 per cent share in the global rice market.

On the other hand, Saudi importers have threatened lawsuits against Indian rice exporters for default on commitments and have begun negotiating with Pakistan and Thailand for rice importing. This move of Saudi importers have come against Indian exporters’ appeal to bear additional duty on their behalf as they (Indian exporters) are not in the condition to absorb this extra duty because of having thin margin.