Indian basmati exports lose price advantage as Pak removes MEP

Nidhi Sharma MUMBAI

BASMATI exporters from India are in a spot despite a sharp fall in the value of rupee versus the US dollar. Although a weaker rupee is good news for them, the removal of the minimum export price (MEP) by the Pakistan government have given basmati exporters from that country an edge over their Indian counterparts.
    MEP for Indian basmati is currently $1,200 per tonne, while Pakistan is offering a much lower rate of $700-900 a tonne for its equivalent variety. As a result, several importing countries like Iran and Saudi Arabia have lowered the price they are willing to pay for Indian basmati to $1050 a tonne.
    To stem rising inflation caused by high commodity prices, the Indian government had recently announced several measures, including certain curbs on rice exports. It banned non-basmati rice exports and fixed the MEP at $1,200 per tonne for basmati rice, inclusive of the export tax of $200 per tonne. Ironically, when the rupee was strong, Indian exporters still managed good earnings as they were getting a price of over $2,000 a tonne with the commodity trading at alltime highs to cater to increased demand.
"With basmati rice from Pakistan quoting nearly $400 lower than the Indian variety, leading importers are preferring to buy from Pakistan," said All-India Rice Exporters Association president Vijay Sethia. He added that government should either remove MEP or lower it to facilitate exports.
    Globally the price of rice has crashed significantly from all-time highs earlier this year, said Mr Sethia. Currently, Thailand is quoting $500 for its Jasmine variety, down from $1,000, and Indian basmati is down around 50% at $1050.
    In 2007-08 crop year ending September, India produced over 96 million tonne of rice. It exported close to 1.2 million tonne of basmati and 3.2 million tonne of non-basmati rice, according to estimates by the Agricultural & Processed Food Export Development Authority (APEDA). India is the largest exporter of basmati rice and its domestic production is close to 3% of the total rice production.
    This year, India is likely to produce nearly 100 million tonne of rice because of the increased acreage. This has reduced the price of paddy by 20-30% in the local markets from last year. Exporters have urged the government to allow exports of non-basmati rice by setting a minimum export price, said Pawan Agarwal, a rice exporter.
    nidhi.sharma1@timesgroup.com