Rice Export from India and the Effect of Government Policy

All the above facts paint a rosy picture of rice export industry in India. However, a closer look will reveal interesting insights about the industry. Firstly, it is generally understood concept that surplus production leads to inflated export figures. Thanks to its farmers, India has maintained its pole position in export notwithstanding its huge domestic demand. Export policies have more or less remained the same. Export when there is a surplus and stop when the opposite. There is an urgent need for a comprehensive rice export policy that ensures the export of rice instead of rotting in some dilapidated warehouses. There should be a consistent approach for the export of rice that delivers the message of the Indian brand.

Secondly, uncertainty in decisions leads to a loss of reputation and business loss. Over 60% of the rice area in the country is un-irrigated. A suitable incentive program assuring initial financial and technical support can result in abundant production fulfilling both domestic as well as international demand. There is also a price restriction on the same variety of rice. Domestic prices have been restricted below the international price for years now. Besides, exports are also restricted for the food security of the domestic population. Export of non-basmati rice was banned up until 1994. Different policies laid out for Basmati and non-Basmati rice affected the overall export potential. There were restrictions to stock only up to a certain limit unless there was an export order. All the actions affected competitiveness, despite a quality product and a good price. Restrictions were lifted on the export of non-Basmati rice only to be implemented again in 2007. A complete ban on the export of non-Basmati rice was put in place in the aftermath of the 2008 financial crisis. To improve the competitiveness of non-Basmati rice, trade liberalization is the right choice. However, liberalization alone is not enough.

Basmati export model can be easily replicated to non-basmati export. Current and previous contrast between Basmati and non-Basmati has always been stark. While Basmati is considered a cash crop, non- Basmati is cheap and staple with a great chance of facing an export ban. Basmati is perhaps the most expensive rice in the world. There is also the capability and the capacity difference between Basmati and non-Basmati rice owners. Non-Basmati rice is often sold by farmers at distressed rate due to lack of storage capacity. Lack of buyers even forces exporters sometimes to sell non-Basmati rice at a discounted price. Some of the big Basmati rice exported and owners can possess the capacity to hold as much as 2 million tons. There is a need to promote both Basmati and non-Basmati rice as a special rice category rather than individual ones. In recent years, non Basmati long-grain rice has picked up the demand due to its taste, aroma and competitive price.