India levies 20% export duty on rice

Reportedly, India has slapped a 20% export duty on a number of rice grades to discourage the shipment of the grain to tame prices in the domestic market, a move that poses repercussions for importing countries.

India has imposed the tax on the exports of paddy, husked rice and semi-milled or wholly milled rice effective immediately.

The move raises concerns regarding the impact on the prices of rice in Bangladesh, which slashed import duty on rice to 15% to encourage private imports and contain prices.

It came less than two weeks after a dry spell affected the cultivation of Aman, the second-biggest source of grain for the country after Boro.

“This is uncomfortable news for us because the private sector is supposed to import a lot of rice. We are also supposed to import 100,000 tons of rice under a government contract,” said Md Ismiel Hossain, Food Secretary.

The food ministry is looking for alternative sources.

Bangladesh government has signed a contract to buy 230,000 tons of rice from Vietnam. The cabinet recently approved a plan to buy 200,000 tons rice from Myanmar.

“We are trying to import rice from Thailand. Recently, they have responded positively,” Hossain said.

Bangladesh, the world’s third-biggest producer of rice, first cut the import duty on rice to 25% from 62.5% to increase the supply to cool off rice prices in the fourth week of June amid repeated floods.

Since then, the government has permitted private firms to import more than one million tons rice, mostly from India.

Lately, prices of fine rice declined 3.65% in Dhaka city. But the price of coarse grain, a benchmark followed by the government to track the price of the staple, has gone up by 1.2%, according to the Trading Corporation of Bangladesh.

Chitta Majumder, Managing Director of Majumder Group of Industries said the move by India may not raise the import cost of his firm as it has placed orders for the rice grades that have not drawn any fresh levy.

“But if the export duty is slapped on the rice imported by others, the local market may become unstable,” he warned.

The tax would discourage buyers from making purchases from India and prompt them to shift towards rivals Thailand and Vietnam, which have been struggling to increase shipments and raise prices, reports Reuters.

India has excluded parboiled and basmati rice from the export duty, but white and brown rice will draw the duty, which accounts for more than 60% of India’s exports, said BV Krishna Rao, President of the All India Rice Exporters Association.

India has been the world’s largest rice exporter in the last decade. Its export earnings grew 9%YoY to US$9.6 billion in 2021-22.

Out of the 21 million tons rice shipment in 2021-22, India exported more than 17 million tons of non-basmati rice and the rest of the volume was aromatic and long grain basmati rice, data from the Indian Commerce Ministry showed.

In terms of volume, Bangladesh, China, Benin and Nepal are major export destinations of Indian rice.

India’s rice production in the 2022-23 could decline to 128.5 million tons mainly because of deficiency in monsoon rains, especially in eastern India where rice planting has shrunk. This could be the first decline in rice production since 2015-16.

The fresh levy on rice exports came four months after India imposed strict curbs on the shipment of wheat due to depleting domestic stocks.