India is considering slashing floor price for basmati rice

INDIA – The government of India is likely to bring down the floor price, or minimum export price (MEP) for basmati rice, to US$950 per metric ton from US$1,200 a metric ton after farmers and exporters complained it was damaging trade.

The decision comes after New Delhi, the world’s biggest rice exporter, earlier said it will maintain a US$1,200 per ton minimum export price (MEP) on basmati rice shipments, which was first imposed in August to calm local prices.

However, the move had raised concerns among exporters, who were worried about a sharp drop in shipments due to the government decision.

The MEP was expected to be cut with the arrival of the new season harvests, but the government said on Oct. 14 said it would maintain it until further notice, angering farmers and exporters who said the new crop had led to a drop in domestic prices.

Authorities later said they were actively reviewing the MEP.

According to the government statement, a review of the floor price “is under active consideration of the government.”

The MEP aims to help authorities ensure that non-basmati rice is not exported as basmati rice.

Prem Garg, president of the Indian Rice Exporters Federation said that the move to review MEP would help both farmers and exporters who suffered on account of the $1,200 MEP.

According to him, the MEP hit the trade so severely that exporters stopped buying rice from farmers.

India and Pakistan are the only growers of basmati rice. New Delhi exports more than 4 million metric tons of basmati – the premium long-grain variety famed for its aroma – to countries such as Iran, Iraq, Yemen, Saudi Arabia, the United Arab Emirates, and the United States.

According to sources, the move could have also been to be at competitive advantage, after Pakistan put the minimum export price (MEP) of basmati at US$1,050 per tonne.

India is therefore considering reducing the MEP on basmati rice by $200-300 from US$1,200 a tonne so that Indian exporters of the aromatic rice do not lose out in the global markets to the neighboring nation

Meanwhile, India still allows exports of non-basmati white rice to Nepal, Cameroon, Malaysia,  Philippines, Seychelles, Ivory Coast, and the Republic of Guinea, a government notification showed.