Indian rice exporters demand restoration of Interest Subvention Scheme

A sharp dip in international prices, high demand at home and a changing international market matrix, are some of the challenges that Indian rice exporters will have to overcome this year

The Dollar Business Bureau

Iran-Market-TheDollarBusiness (Pic - Bazaar-e Reza in Mashhad, Iran) Iran has slowed down purchases of Indian agriculture products in recent months following the ease of sanctions against it earlier this year

  Faced with various hurdles in the international markets, the All India Rice Exporters Association (AIREA) has urged the government to restore the Interest Subvention Scheme to avert a decline in rice exports and losses this year. After remaining a leader for three years, Indian rice exporters are likely to face a slowdown in FY2014-15 due to geo-political changes, low global prices and high supplies. According to official sources, India exported around 10.9 million tonnes of rice in FY2013-14, and India’s total rice exports during April – September 2014 stood at around 5.3 million tonnes, on par with what was exported last year.

Rice-TheDollarBusiness1 Source - Ministry of Commerce, India

However, a decline may have begun. International prices of rice have declined sharply this year, plunging about 19.4% in 2014 (average Thai rice prices) compared to average prices in 2013. Meanwhile, supplies from Thailand is flooding the international market, with some estimates saying that rice released from government stockpile could be around 60% higher this year compared to 2013. Growing Thai rice exports this year will largely be on expense of India, says the UN’s Food and Agriculture Organisation (FAO). According to FAO, India’s rice exports in FY2014-15 are expected to decline by around 20%, with most of the decline in basmati rice to key markets such as Iran which accounted for around 38% of India’s total basmati rice exports last year. India’s basmati rice exports to Iran have declined to around 423,431 tonnes in April – September 2014, which is about 30% of total basmati rice exports to Iran last year. Moreover, India’s rice exports to Iran are likely to decline further due to the phytosanitary and tariff restrictions placed by Iran, which is increasingly looking at other sources after the easing of sanctions earlier this year.

]Rice-TheDollarBusiness2 Source - Ministry of Commerce, India

In July 2014, Iran increased the accepted level of arsenic in rice from 80 ppb (parts per billion) to 120 ppb, and also hiked the import duty on basmati rice from 22% to 40%. Both these measures are likely to impact India’s basmati rice exports this year. Moreover, the Enforcement Directorate (ED) investigation of UCO bank’s dealings with Iranian importers is also likely to hurt exports. Indian rice exporters, led by AIREA, say that the government should restore the Interest Subvention Scheme that expired in April 2014 immediately. Some have also urged the government to increase the scheme from 3% to 5%. The government has said that it may announce the scheme for rice exporters in the forthcoming Foreign Trade Policy.    

This article was published on December 13, 2014.