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Monday, Sep 16, 2002

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Calibrating rice exports

THE LONG DRY spell of July and the decline in area coverage for paddy are sure to reduce the ensuing kharif rice output by 10-12 million tonnes. Even with possible rebound in the rabi season, the total rice production in 2002-03 may not exceed 80 m.t., down from 91.6 m.t. last year. Some agencies are pegging the output even lower, at 78 m.t. Production of other foodgrains — coarse cereals and pulses — too will be lower this kharif and the total decline can aggregate some 20 m.t. with a concomitant impact on foodgrains availability and prices. Rice procurement next season could be down by a fifth to around 16 m.t. Moreover, rice stocks have fallen below 20 m.t. as offtake for both domestic consumption and exports has been high in recent months. Notwithstanding a slight tightening of domestic supplies, the country could still remain a dominant exporter even next year. It is in this background that New Delhi must examine the rice export policy.

After three years, India has once again emerged a major rice exporter, giving the traditional suppliers, Thailand and Vietnam, a run for their money. Export shipments this calendar will exceed 4.5 m.t., more than double the 2 m.t. shipped out last year. The US Department of Agriculture has projected India's rice exports in 2002 at an unprecedented 5.5 m.t. based on the pace of shipments to date. While the country's export performance — world's second largest rice exporter after Thailand — is indeed heartening, it needs to be examined if India can obtain better prices by calibrating its exports, instead of demonstrating a desperation to liquidate stocks. The world market knows full well of India's large inventory and its anxiety to reduce it for reasons both economic and political. It is one reason why global rice prices have remained stable despite a 1 m.t. rise in world import trade volume to 25 m.t. and a perceptible slowdown in exports by Vietnam, China and Pakistan. The FAO's World Rice Price Index is stuck at 90 (1982-84 = 100) since early 2001.

It needs no renewed emphasis that global rice price outlook for the short term is positive as global import prospects have brightened somewhat following higher purchases by major buyers such as Indonesia and Iran. Growing uncertainty about production prospects in a number of major producing countries will give prices more strength. As a significant player holding large stocks and offering at very attractive prices, India can gain better unit value if a strategy of calibrated exports is followed. The global rice market surely has an upside that India should exploit. Even though the FCI has raised the sale prices of raw and parboiled rice from August 1, there is no reason why further hikes from time to time should not be considered. No doubt, a firming rupee vis-a-vis the dollar reduces export price realisation in rupee terms; but that is only a minor factor. Policy-makers need to be a lot more market-savvy and read signals from the marketplace. Barter trade with Indonesia (rice for palm oil) should be explored. Looking to international market conditions and our emerging dominance, no opportunity to improve the price realisation should be lost so that subsidy on exports stands reduced.

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