INDIA BUSINESS WORLD - JANUARY 1^st - JANUARY 15^th - 2008

MINIMUM PRICE FOR RICE EXPORT RAISED TO $500/T

The government has raised the minimum export price of rice to $500 per tonne to discourage exports and make more foodgrain available in the domestic market.

The commerce ministry agreed to the proposal sent by the food ministry advocating the hike, an official source said. The director general of foreign trade has issued the notification fixing the minimum export price (MEP) at $500 per tonne FOB or Rs 20,000 per tonne FOB.

The government on October 25 had decided to partially lift a ban on the country's rice export by fixing the MEP at $425 per tonne. The Centre had imposed the ban on exports of non-basmati rice on October 9 to build buffer stock and improve domestic supplies.

The food ministry has also informally told the commerce ministry to ensure that not more than eight lakh tonnes of non-basmati were rice exported out of the country during the current year, the source said, including shipment under humanitarian grounds.

The main reason for limiting the export quantity is to increase domestic availability as prices of common varieties of rice have shot up by Rs 2-3 per kg in the last two months, the source said. The All India Rice Exporters Association could not be contacted even as some exporters have supported the move.

"When the government is spending so much amount in terms of providing water and electricity at subsidised rate, it has the first right over rice cultivated in the country as food security is more important than foreign exchange," a leading rice exporter said.

The exporter said that 3,000-5,000 litres of water are consumed in producing 1 kg of rice. "Subsidy is not given for other countries to benefit," he said.

Hike in MEP was necessary as countries like Saudi Arabia recently extended subsidy to their rice imports following supply constraint in the international market, the exporter said.

Saudi Arabia in December had announced a subsidy of 1,000 riyal a ton for import of rice. However, some rice exporters allege that fixing a higher MEP will leave fewer players in the international markets as those exporting the varieties that fetch below Rs 20,000 a tonne are debarred from export market.

India and Vietnam, both of which restricted their rice exports in 2007, are two leading suppliers of the foodgrain in the international markets, apart from the US. But, a 28-30% shortfall in US rice production led to a rise in global prices, a trader said, adding that Indian rice in Europe and the Gulf is in more demand as it is GM-free.

India exported 3.7 million tonnes of non-Basmati rice worth Rs 4,258 crore in 2006-07, accounting for bulk of the total rice exports, including Basmati.