Removal of minimum export price for basmati will make Indian rice competitive

By Animesh Deb
New Delhi [India], September 20 : The removal of minimum export price (MEP) on basmati rice ahead of the kharif crop will benefit both farmers and exporters, said industry participants. The removal of trade barrier will help Indian exporters regain competitiveness in the overseas markets.
"The removal of MEP on basmati rice is a pivotal move, expected to significantly benefit both farmers and exporters. For farmers, this change is projected to increase paddy prices by 7-10 per cent, providing them with better income as the price floor that capped export prices is now lifted," said Akshay Gupta, Head, Bulk Exports, KRBL Limited, which sells popular basmati rice under 'India Gate' brand.
For exporters, the absence of MEP allows more flexible pricing, making Indian basmati rice more competitive globally, Gupta told ANI.
"With the removal of MEP, Indian exporters are now well-positioned to offer basmati rice at more competitive prices globally," Gupta added.
"We're also seeing rising interest from emerging markets in Africa and Southeast Asia, where consumers are drawn to basmati's premium appeal at a more affordable price point," KRBL's Gupta added.
India is the leading exporter and grower of basmati rice to the global market, followed by neighbouring Pakistan.
As per APEDA, India exported 5.2 million tonne of basmati rice to the world for Rs 48,389.18 crores in 2023-24. Major export destinations last year were Saudi Arab, Iran, Iraq, UAE, the US, and Yemen.
Amit Marwaha, Managing Director and CEO, DRRK Foods, another basmati rice exporter also echoed that removal of government-imposed price barriers is beneficial for industry.
"Last year, our prices vis-a-vis Pakistan were expensive though our quality is much much better... From the trade perspective, we had to lose some market share to Pakistan...There were challenges in the market, people were hardening on the prices, but we could not go down below a price. This year it's going to be a level playing field," Marwaha told ANI.
"The quality will determine who gets the major market share, for that I am sure our basmati is much much superior...," he said.
"Prices of basmati rice have started rising ever since the MEP has been removed. It will benefit farmers as they will get remunerative prices for their produce," Marwaha added.
"Fresh orders have already started to come in. We are expecting a double-digit growth in exports from India...Net net, last year Pakistan gained at our cost. That barrier is now lifted," Marwaha further added.
Over the past six months, paddy prices have decreased by roughly 15 per cent. This year too with favourable monsoon, production of excellent grain quality is likely to be good. However, prices of basmati will be discovered during the procurement season beginning October.
Crisil Ratings in a report this week also asserted that the removal of minimum export price, and adequate availability of basmati rice in domestic market, will help enhance exports.
"Exports, which form 72 per cent of basmati rice sales, are likely to grow 3-4 per cent on-year this fiscal as countries look to secure their food supplies amid geopolitical uncertainties. Domestic sales are likely to rise 6 per cent, driven by demand from the HoReCa (hotel, restaurant and cafe) segment, lower prices, and a steady rise in household income," said Nitin Kansal, Director, CRISIL Ratings.
In August 2023, a floor price of USD 1,200 per tonne was imposed on basmati rice exports as a temporary measure. The decision was in response to a tight domestic supply and rising rice prices in the domestic market.
It was also aimed at preventing the misclassification of non-basmati rice as basmati during exports, given that the export of non-basmati white rice is under prohibition.
However, following representations from trade bodies and stakeholders, the government reduced the floor price to USD 950 per tonne in October 2023.
With the removal of MEP, the government and its export facilitation arm APEDA will now closely monitor export contracts to prevent unrealistic pricing of basmati rice and ensure transparency in export practices.