New Indian government unlikely to lift export duty on parboiled rice: sources

The new Indian government, to be elected on June 4, is not expected to remove the 20% export duty on parboiled rice, market sources told S&P Global Commodity Insights, likely keeping the prices artificially high for international consumers.

The initial objective of the duties was to control the rising food inflation, said a Faridabad-based rice exporter. However, the government of prime minister Narendra Modi has now realized that the levy on parboiled exports is also bringing in millions of USD in revenues without affecting local prices, he said.

Mirroring the sentiment, a Pune-based exporter said that after the elections the new government is not expected to shun the export duties on parboiled rice as they are generating sizable revenue for the treasury. "So, any optimism that a bumper rice harvest forecast in 2024 could compel New Delhi to reverse the levies, is misguided in my opinion," he said.

It all started in August 2022, when the Modi government banned broken rice exports and imposed additional duties on non-basmati white rice outflows. And by July 2023, the government had restricted non-basmati white rice exports, imposed a 20% duty on parboiled rice shipments and fixed a minimum export price for basmati at $950/mt.

As a result, the Indian rice exports plummeted 18.5% on the year to 16.5 million mt in 2023-24, S&P Global Commodity Insights data showed.

While most of the parboiled variety is typically exported to West African nations, Indian basmati rice is primarily shipped to the Middle East.

Duty-hit Indian parboiled remains price competitive

Irrespective of which party comes to power, export duties on parboiled rice are not going to be lifted as the price has consistently remained the most competitive in the region, said Raghav Reddy, chief executive officer of MM Mills Ltd, a rice trading company.

And the Commodity Insights data confirms a similar trend.

Between Jan. 1 and May 29, the daily average Platts assessment for India Long Grain Parboiled Milled Rice 5% STX FOB was at $530/mt, while Thai Long Grain Parboiled Milled Rice 100% STX FOB was seen at $605/mt, the data showed.

There is no reason for New Delhi to remove duties on parboiled rice as it keeps the local prices in check and the government gets additional revenues, said Sandeep Agarwal, business head of rice at Aditya Birla Global Trading, a Dubai-based commodities trading company.

Price-sensitive African consumers

Although the Indian rice trading sector has largely remained unscathed from New Delhi's tariff policy, it has had a significant impact on West Africa, the largest consumer of parboiled rice. With Indian exporters largely transferring the burden of 20% additional duties to importers, poor nations are hit the hardest.

According to India's Agricultural and Processed Food Products Export Development Authority (APEDA), the biggest importers of Indian parboiled in West Africa are Benin, Cote d'Ivoire, Togo, Guinea, Somalia, Liberia and Djibouti.

These countries have a large portion of population below poverty line and thus are very price sensitive. Although rice is a staple diet in Africa, the slightest price surge forces the general population to either look for alternative suppliers or reduce their food consumption.

For African consumers, there is no viable alternative to Indian parboiled rice, which remains the cheapest in the world despite the 20% export tariff.

Even with the export taxes, Indian parboiled rice is the most price-competitive in the world, said Burachai Kanlayasirivat, freight operator at Ascend Commodities SA, a Geneva-based commodities trading company. So, there is no urgency [from the Indian rice trading sector] to pressure the government to eliminate the duties, he said.

According to market sources, African consumers have no option but to live with higher rice prices, at least for the coming months.