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27 Jun 2024 | 17:24 UTC
Highlights
Government mulls fixed duty of $90/mt on parboiled rice exports
Exporters welcome fixed duty as more transparent
The Indian government is likely to extend a 20% export tariff policy on parboiled rice until at least 2025, market sources told S&P Global Commodity Insights.
In addition, the government is mulling a fixed duty of roughly $90/mt on FOB, instead of percentage-based duty for parboiled rice, sources said June 26.
In shipping terms, FOB, or free on board, means the buyer takes ownership and risk for goods during transport.
Some of the rice exporters welcomed the prospect of fixed duty, saying that the policy will help in bringing more transparency to the market.
"Ever since the 20% duty was imposed in July 2023, there has been a lot of ambiguity in the parboiled rice exports," said a Kolkata-based exporter June 26.
"We [exporters] will be happy to pay even $150/mt fixed duty, as it is more efficient alternative to the percentage-based tariffs, which remains vague till date," he said.
If the fixed duty is $100/mt, then irrespective of the FOB prices at $450/mt or $550/mt, duty will remain $100/mt, another Kolkata-based exporter said. The government is currently holding multiple rounds of meetings with different rice industry stakeholders and a decision is imminent, he said.
The proposal of tariff extension until 2025 and imposing a fixed levy has been approved by a group of ministers and is currently with the Inter-Ministerial Consultation waiting for Cabinet Secretariat's approval, a Delhi-based exporter said. The fixed duty of $90/mt will help rice exporters offset unstable freight rates.
The government banned broken rice exports and imposed additional duties on non-basmati white rice outflows to rein in rising food inflation. 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, Indian rice exports plummeted 19.8% on the year to 17.71 million mt in 2022-23, S&P Global Commodity Insights data showed.
While most of the parboiled variety is typically exported to West African countries, Indian basmati rice is primarily shipped to the Middle East.
It was expected that the government is likely to extend the export duty on parboiled rice, market sources said.
Export duties on Indian parboiled rice are not going to be lifted as the price has consistently remained the most competitive in the region, said Raghav Reddy, CEO of MM Mills, a rice trading company.
Commodity Insights data confirmed this statement.
Between Jan. 1 and June 26, the daily average Platts assessment for India Long Grain Parboiled Milled Rice 5% STX FOB was at $535/mt, which is $50-$80/mt cheaper than Pakistan, Thailand or Vietnam-origin rice, 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.
With the fate of restrictions on white rice exports still vague, the industry is eagerly awaiting the government's move to fix duties on parboiled rice.
Fixing duty at $90/mt or $100/mt on parboiled rice exports should be seen as a market-friendly policy move by the government and is likely to boost rice exports, sources said.
India is the world's largest rice exporter and is forecast to ship out 21.47 million mt in calendar year 2024, up 14% on the year, Commodity Insights data showed, which if realized, will be one of the highest shipment volumes ever by the country.