Centre's export ban on rice likely to be reversed only if domestic production does not suffer

It’s 9.30 in the morning. Amid mounds of paddy heaped across the sprawling grains market complex in Delhi’s Narela, over three dozen men form a semicircle and are ready for the next boli (bidding). They include zamindars (landowners), kaccha arthiyas (commission agents) and pucca arthiyas (middlemen for millers and exporters). This troika will soon decide the fate of a truckload of high-yielding Pusa-1718 variety of basmati, the aromatic, long-grained rice that has a huge demand in the global market. The winner of the bid, Latiq Ahmed, immediately calls up his manager in a Haryana rice mill and asks him to transfer Rs 4,76,100 to the seller’s bank account. Sadhuram, the commission agent, is thrilled to have clinched a “good deal” and pocketed an instant 2% brokerage fee, Rs 9,522 in this case, from the purchaser.

“Two weeks ago, there was a slump in basmati’s demand. Look at this market now. This bid has fetched Rs 4,761 per quintal,” says Bobby Goyal, an agent present at the high-voltage bidding that lasted less than five minutes.

“The government has banned the export of non-basmati rice and, here, the basmati prices are going through the roof,” he says. Another variety of basmati paddy, which was auctioned minutes earlier, had fetched a less — Rs 4,071 per quintal. This was the scene that unfolded earlier this week when ET visited the Agricultural Produce Market Committee’s mandi at Narela, one of the biggest grains markets in the country, which auctioned rice and wheat worth Rs 1,470 crore in 2022-23.


On July 20, the government banned the export of non-basmati rice. Ahead of crucial state elections, it does not want to risk domestic food security or exacerbate inflation. Export of non-basmati rice, excluding parboiled, rose from 1.3 million metric tonnes (MMT) in pre-pandemic 2019-20 to 6.3 MMT in 2022-23, an almost five-fold jump.

Why ban?
As the global demand for rice continues to be quite high, there was concern that India’s overall rice exports may surpass 30 MMT this year, impacting availability of the grain in the domestic market, unless some reasonable restrictions were clamped. In the last fiscal year, India exported 22.2 MMT of rice across four categories — basmati, parboiled, broken rice and non-basmati white rice. The last category, now prohibited for export, forms roughly one-fourth of total rice shipped out from the country.

Revoking the ban will likely depend on international market behaviour, says agricultural economist and member of NITI Aayog Ramesh Chand. “India could reconsider the ban on white rice export once the global demand reduces. It may also depend on this year’s yield which we will be able to estimate by September-October,” Chand tells ET.

Justifying the prohibition, he says “we are not sure of the monsoon or any El Nino effect on rice production this year”. There is also growing concern about the late sowing of rice in several pockets of the country, which could lead to a shortfall in production. “So any responsible government will be cautious (at this juncture),” he adds. India produced 135.5 MMT of rice in 2022-23, according to third advance estimates released in May.

The government is risk-averse for a political reason. Assembly polls are due in five states — Madhya Pradesh, Rajasthan, Chhattisgarh, Telangana and Mizoram — a crucial semifinal ahead of next year’s Lok Sabha elections. The ruling Bharatiya Janata Party (BJP), which has just lost the election in Karnataka and will now face an alliance of 26 opposition parties named INDIA, will weigh inflation seriously. The retail inflation for July, which is likely to be released on August 14, may breach the Reserve Bank’s 6% tolerance ceiling mainly due to sticky pulses and cereal prices even as the cost of vegetables has eased, according to a report released by the global financial services major Nomura.

After the Centre’s ban on the export of nonbasmati white rice on July 20, the ministry of consumer affairs, food and public distribution said the retail rice prices had “increased by 11.5% over a year and 3% over the past month,” a reason why the government resorted to the drastic step.

Significantly, India had not banned rice even during the peak of the pandemic although some of its major competitors in the global market such as Thailand, Vietnam and Pakistan imposed restrictions to ensure an uninterrupted domestic grains supply. What has also had the government concerned was the unusual growth in rice exports in the first three months of the current fiscal year. India exported 1.5 MMT of rice in the April-June quarter, a 35% y-o-y rise, indicating the trend for the rest of the year.

Grain & loss
The ban will hit large farmers in states producing non-basmati white rice such as Punjab, Telangana, Uttar Pradesh, Madhya Pradesh, Chhattisgarh and Andhra Pradesh. Since the prices of rice in the global market are at a decadal high, these farmers could have secured good profits. As India accounts for more than 40% of world rice exports (56 MMT in 2022), shipping it to about 140 nations, this partial ban will have a fallout on global rice availability and prices.

Rakesh Kumar Kapoor, director of rice exporter Bhole Nath Foods, says India’s domestic prices in the non-basmati segment have moderated a bit, about Rs 2 per kg, after the ban. “We don’t anticipate any further fall in non-basmati prices. As far as the price of basmati is concerned, it will remain high till September when the current season’s crops start coming in. From then, prices will depend on the estimated yield for this season and whether or not the global demand stabilises,” he says. Kapoor adds that after the ban, select non-basmati consumers must have shifted their loyalty to basmati although it could be a limited trend as there is a substantial price difference between the two.

Most exporters whom ET spoke to say the ban is a knee-jerk reaction from the government as rice stocks with the Food Corporation of India (FCI) are three times the buffer requirement of 13.5 MMT. Vinod Kaul, executive director, All India Rice Exporters’ Association, says that after making a detailed calculation they estimate that the domestic consumption of rice will at best be 68-69 MMT for this fiscal year, adding that India is nowhere near a catastrophic scenario of rice shortfall. He says their calculation is based on the government data that says per capita intake of rice is 190 grams per day and only 70% of the population consumes this cereal.

The exporters’ association has urged the government to revoke the ban and has even said that they are willing to pay more export duties if needed. “We have appealed to the government to reconsider the ban and increase the export duty further (from the current level of 20% imposed on white rice last year). After all, Indian non-basmati rice is about $50 cheaper (per tonne) than the rice from Vietnam or Thailand. We will be able to absorb any additional duty burdens,” Kaul says.

The government is unlikely to take the bait. It has taken the risk of banning an item consumed mostly by African nations at a time when India is attempting to be the voice of the Global South at the upcoming G20 summit in New Delhi. This implies only one thing: the government does not want rice to be a tomato in the upcoming election season, embellishing the Opposition’s election menu.