Indian rice exporters fear cost surge from potential domestic fuel hike

Indian rice exporters expressed concerns over a possible rise in domestic fuel prices, which could aggravate the current situation of truck shortages, increased logistical costs, and potentially lead to a rise in input costs for rice, sources told Platts, part of S&P Global Energy, May 12.

Prime Minister Narendra Modi urged the country on May 10 to achieve economic self-reliance, including a call to reduce imported fuel consumption by using public transportation and carpooling.

Market sources anticipate a rise in fuel prices in the near future.

"[A fuel] price hike is on the cards, might happen any time soon," a Madhya Pradesh-based exporter said.

"A letter has been sent to APEDA and the state government to promote ICD Raipur for logistics subsidy," Mukesh Jain, president of The Rice Exporters Association of Chhattisgarh, said.

The concern stems from ongoing diesel and truck shortages, as well as subdued international demand for rice.

"We are seeing a noticeable impact from the [international] diesel price increase and higher inland transportation costs," A Gujarat-based exporter said, adding, "Trucking rates have moved up across most routes, especially for factory-to-port movement, which is adding pressure on overall export pricing and margins."

"The effect is more visible on lower-margin commodities where logistics forms a significant part of the landed cost. Since [state] elections are now over, the market is expecting some stabilization, but transporters are still quoting cautiously due to fuel volatility and operational costs," the exporter added.

A Karnataka-based exporter said that freight rates were high and there was a dearth of trucks pan-India amid low diesel availability.

The rise in international diesel prices is also impacting destination markets.

"The problem is not only at the load port, but also at the discharge port. The cargo has arrived that is lying in the bonded warehouses, local trucks at the destination are not able to get diesel to ply their trucks and load the cargo and take it to warehouses or to the customers," said Rajesh Pahariya, chief manager for business development at Kribhco Agri Business.

They also added that India is likely to face a rise in international fuel prices, and the market is likely to tighten.

Subdued international demand

A Raipur-based exporter said that there's been limited trade activity in the rice market, with overseas market demand not supporting it.

In this situation, if the domestic diesel prices increase, then the cost will be borne by millers and exporters, the exporter added.

Amid subdued international demand, Indian rice prices have fallen to a multiyear low in May.

Platts assessed Indian parboiled 5% rice at $324/mt FOB on May 11, $20/mt down month over month.