INTERVIEW: Indian rice exporters push for logistics subsidy, MSME support to boost exports: TREAC

India's rice exporters are urging the government to introduce a logistics subsidy for landlocked states and continue MSME support to strengthen export competitiveness, Mukesh Jain, president of The Rice Exporters Association of Chhattisgarh, told Platts, part of S&P Global Energy, in an interview Jan. 14.

Jain said TREAC has made several recommendations to the Indian government ahead of the upcoming budget. These include a continuation of the RoDTEP (Remission of Duties and Taxes on Exported Products), continuation of the interest subvention scheme, and a logistics subsidy specifically for central India and landlocked states.

The RoDTEP scheme, operational since Jan. 1, 2021, is designed to reimburse exporters for embedded duties, taxes and levies that are not otherwise refunded under other existing schemes.

Jain highlighted the government's ongoing focus on MSMEs, or micro, small and medium enterprises, which contribute roughly 35% to India's economy. "The government has allocated Rupees 25,000 crore to boost MSMEs, as announced by [commerce and industry minister] Piyush Goyal in line with [Prime Minister Narendra Modi's] vision. This will significantly boost our exports."

In November last year, the Indian government allocated Rupees 25,060 crore (around $2.8 billion) for a new six-year Export Promotion Mission (EPM) to significantly boost the competitiveness of MSMEs involved in exports.

Jain also noted the positive outcome of the India International Rice Summit (IIRS) in Raipur in early January. The event attracted 1,075 participants, including buyers from 12 countries and ambassadors from six countries, underscoring growing global engagement with India's rice sector and promoting innovation, sustainability, and trade.

Logistics challenges and dry ports

India's exporters face a cost differential of nearly Rupees 1,000/mt when exporting from landlocked states versus coastal ports. Jain emphasized that subsidies for exports via dry ports such as Nagpur or ports like Visakhapatnam would help bridge this gap.

"If this gap is addressed, dry ports could become lifelines for exports," he said. "Shipping lines would be encouraged to operate here, as imports and exports would become more cost-effective."

Chhattisgarh rice stocks and procurement

Jain described current rice stocks in Chhattisgarh as "comfortable," following a bumper paddy crop. "Procurement is ongoing until Jan. 31, with around 13 million metric tons of paddy procured. This figure may rise to 14.5-15 million metric tons," he estimated.

Government procurement remains strict on quality, requiring moisture levels below 14%, which has slowed the pace slightly, he added.

Export competitiveness and surplus management

India faces stiff competition from Myanmar, Pakistan, Thailand, Cambodia, and Vietnam.

Platts assessed India 5% broken white rice at $354/mt FOB Jan. 14, up $10/mt on the month. On the same date, Platts assessed Thailand 5% broken white rice at $370/mt FOB, Pakistan at $382/mt FOB, Vietnam at $355/mt FOB, and Myanmar at $359/mt FOB FCL.

A high minimum support price (MSP) for paddy makes India less competitive internationally, Jain explained. He emphasized the need for a policy linking OMSS (Open Market Sales Scheme) prices to international market rates. OMSS is used by the Food Corporation of India (FCI) to sell surplus food grains domestically.

"Managing surplus effectively would allow India to compete better while ensuring farmers benefit," he said, adding that many exporters who participated in Bangladesh tenders likely executed deals at a loss due to aggressive low-price bidding.

Risks for exporters

For exporters, government policy is the main risk, according to Jain.

"Price fluctuations and weather are manageable, but policies linked to procurement and farmer support directly affect exports," he said.

"We have suggested revisiting the 2002 FCI stock liquidation framework, which allowed surplus rice to be liquidated and reviewing the policy so that liquidation is possible without losses to the government while benefiting farmers and exporters."

The High-Level Committee on Long-Term Grain Policy, chaired by Professor Abhijit Sen and formed in 2000, recommended welfare-linked stock reduction and disposal of old grain to address excess FCI inventories.

Jain added that exports are likely to rise sharply once a clear OMSS policy is announced.

He also noted that the Chhattisgarh dry port is now connected to the Bharatmala Pariyojana and the port connectivity project, reducing the road distance to Visakhapatnam by 150 km. "This will lower logistics costs, benefit neighboring states, and encourage shipping lines to operate regularly," Jain said.

"Exports from Chhattisgarh will grow, and neighboring states will benefit as the dry port becomes fully operational," Jain said.

In terms of expanding exports, Jain said Latin America remains a potential growth market, although he noted geopolitical sensitivities. He also noted that Basmati trade, especially with the US, is less affected by tariffs and more influenced by currency fluctuations.

"The government's approach of allowing the rupee to weaken supports export volumes, but the dollar value of shipments falls, impacting export revenue," he said.