Smart rice policy would be nice

India's rice harvest is set to shrink for the first time in a decade. Industry estimates put 2026-27 output at around 144 MT, down 10 MT, or 6.5%, from last year's record 154 MT, the steepest fall since the El Nino drought of 2009-10.

Monsoon rainfall is 15% below normal, with deficits of 42% in some rice-growing states. Indian export quotes are at their highest in more than a year. This shock will test how we manage rice, not whether we can feed ourselves.

Field report: Paddy sowing stood at 42.68 mn ha on September 11, 3.8% below last year's 44.38 mn ha. At roughly 2.8 tonnes of rice per ha in the kharif season, which supplies about four-fifths of output, lost acreage explains only about 5 mt. The other 5 MT is yield, a 4-5% thinning of grain as dry spells hit the crop at maturity. Half the damage is in fields not planted, half in fields planted but starved.


Regional shock: Karnataka, Telangana, Andhra Pradesh and Tamil Nadu account for 12.3 lakh of the 17 lakh ha of net acreage lost, or 72%. UP, MP, Maharashtra and Jharkhand add 5.7 lakh more, while Odisha and Assam planted more. This regional shock demands a regional response, not a national sledgehammer.

Farmers: At this year's MSP of ₹2,441 per quintal, a ha yielding 4.1 tonnes of paddy grosses about ₹1 lakh. Based on my estimates, a 4.5% yield loss costs the average grower roughly ₹4,500 per ha. In districts where rainfall fell 40% short, a loss of one- fifth, or ₹20,000, is plausible. Distress will concentrate among smallholders on rain-fed plots.

Stock report: Central and state reserves, including unmilled paddy, stood at a record 59.6 MT on September 1, 5.8 times the 10.3 MT buffer target for October 1. Even at 144 MT, production exceeds domestic need of about 121 MT by 23 MT, against 33 MT last year. That nearly covers last year's exports of 24.5 MT, which made India about 40% of the world rice trade. Stocks above the buffer, 49 MT, are 5x the harvest loss. Availability is not the problem. Price and policy are.

Reflex action: Paddy at this year's MSP works out to about ₹36 a kg of milled rice before storage and interest. Yet, FCI shipped 6.35 mt to ethanol distilleries between June 2025 and June 2026 for ₹14,597 cr, about ₹23 a kg, some 40% below acquisition cost. That is roughly ₹9,700 cr of implicit subsidy for burning grain. Worse, in 2022 and 2023, we slapped export curbs on rice in a panic and lifted them only after stocks ballooned. Reflex, not rule, has run our rice policy.

So, what should be done?

Keep exports open: With 59.6 MT in the bins, a ban would punish farmers, further spike world prices already rising in Thailand and Vietnam, and erode goodwill with importers in Africa and Asia. If domestic prices heat up, use a published minimum export price for non-basmati white rice, not a prohibition.

Release stocks: Freeze ethanol diversion at 7.2 MT allocated this supply year, and pre-commit that if retail rice inflation crosses, say, 8%, unallocated FCI rice moves to open market sales in deficit states at a reserve price that recovers cost, not 40% below cost. Premium-variety growers will sell in the open market for better prices, so let procurement fall. That is stock management by the market.

Compensate farmers: Use satellite-based crop assessment to fast-track insurance claims by direct transfer to the 4 southern states and to rain-fed districts elsewhere before rabi sowing.

Protect rabi: Reservoirs hold less water than normal, so, winter-sown rice, which accounts for less than a fifth of output, is at risk. States should steer farmers towards pulses, oilseeds and maize with the coming rabi MSPs and assured procurement.

Use crisis to reform: Over-procurement created the 49 MT overhang. Gradually shift from price and grain subsidies to direct income support, right-size the buffer, and promote short-duration, drought-tolerant varieties and direct-seeded rice, so the next El Nino, which returns every 2-7 yrs, finds yields protected, not just warehouses filled.

Full granaries have brought India calm. The real test is whether Delhi uses that cushion to build a rules-based rice policy, rather than reverting to reflexive intervention.

The writer is economic adviser, advisory support group, chief minister's office, Government of Uttarakhand