The delay in advanced crop output estimates for the kharif season has raised fears that the decline in rice output this season could be more than the government projection of 10 million tonne, forcing India to resort to imports.
Traders expect India to import 2-5 million tonne of rice. Sources say a proposal to scrap the 70% import duty on rice to facilitate increased non-premium rice imports is already under consideration.
Commerce minister Anand Sharma had, however, late last month denied any such move although an empowered group of ministers had cleared it early September and food minister Sharad Pawar had indicated imports if necessary later in the month.
India's rice production is projected to drop from 99 million tonnes last year to 89 million tonnes this year. However, a report by the United States Department of Agriculture (USDA) pegged the shortfall in India's rice output at as high as 17 million tonnes. India's annual rice consumption is about 86 million tonnes but an over 10 million tonne drop in rice output in the 2009-10 marketing year, starting October 1, would increase the pressure on the existing stocks with the government and also tend to push up open market prices. Besides a slight drop in output in Punjab, another big producer, Andhra Pradesh (output 12 million tonnes of rice last year), is also expected to produce far lesser this year.
Retail prices are already up 14% over the last one year. The shortfall could also make it difficult for the government to buy enough rice for its welfare and PDS priorities in a drought year at the current minimum support price (MSP).
Though the new rice marketing season started (October 1) with over 285 lakh tonnes of wheat and 160 lakh tonnes of rice stocks, well above the minimum buffer norm of 110 lakh tonnes of wheat and 52 lakh tonnes for rice, the market is sensitive to production shortage signals. “It got spooked after several nervous decisions of the government such as delaying the advance estimates on crop output (usually released in September but the Centre has yet to get all the paddy acreage inputs from states this year), extension of stock holding limits by traders and continuing with the export ban on non-premium rice,” a commodity analyst said.
“The government will try to meet some of its welfare foodgrain needs with the satisfactory wheat stocks it has. But that will not be enough. We estimate that anywhere between 2-5 million tonnes, definitely two million tonnes at least, of rice will need to be imported to meet domestic needs,” a prominent Delhi-based rice exporter told ET.
The empowered group of ministers or EGoM had early last month taken the controversial decision of easing exports of Basmati and other premium rice priced over $900/tonne despite a possible drought-fuelled shortage in production this marketing season.
Apparently, while allowing exports the government wants the private sector to import at least twice the non-Basmati rice (around $375/tonne for 25% brokens from Vietnam currently) for every tonne of Basmati exported so that domestic supply would be ample and retail price held in check. Traders have a huge unsold stock of basmati rice thanks to the rice export ban.
Source: The Economic Times