In a move to boost domestic supplies, the Government of India imposed a 20 percent export duty on all varieties of non-basmati rice except for parboiled rice. This move came into effect following a fall in area under the paddy crop due to several rounds of heatwaves throughout the country and low rainfall. The government has now extended the last date for the export of broken rice in transit till September 30 which was earlier allowed till September 15.
India banned exports of broken rice and imposed duty on exports of various other types on September 8, as the world’s biggest exporter of the grain tries to boost local supplies and calm soaring prices. The surprise move, trapped cargo that was moved to the ports or was in transit before the government made the announcement, said B.V. Krishna Rao, president of The Rice Exporters Association (TREA)*.
At least 20 ships are waiting to load around 600,000 tonnes of rice at Indian ports as the Government of India’s surprise export restrictions have trapped cargoes for nearly a fortnight, forcing sellers to pay demurrage charges. Apart from 600,000 tonnes of rice that is waiting for the loading at berthed vessels, an additional quantity of 400,000 tonnes of rice is stuck at port warehouses and container freight stations (CFS) even though these contracts are backed by letters of credit (LCs).**
The Effect of Ban on Rice Exporters
Broken rice shipments are stuck because of the ban, while in the case of white rice, buyers and sellers are not willing to pay the 20% duty over the agreed price, dealers said. A New Delhi-Based dealer with a global trading firm said in a conversation that since exports attract a tax, there is a dispute between buyers and sellers over who will pay the tax over and above the agreed price.
In similar circumstances, New Delhi has in the past provided exemptions for contracts backed by LCs, or payment guarantees, issued until the day the government made a policy change. But that has not been the case this time. Broken rice shipments were heading to China, Senegal, and Djibouti, while other grades of white rice were bought by buyers in Benin, Sri Lanka, Turkey and the United Arab Emirates and are now stuck at Indian ports.
India exports rice to more than 150 countries and any reduction in shipments would increase upward pressure on food prices around the world, which are already rising because of drought, heatwaves and Russia’s invasion of Ukraine.
India is the largest exporter of rice and any change in its trade policies significantly affects the global market. The government’s decision to curb exports of rice and impose a 20 percent duty has caused challenges for Indian rice exporters and for rice buyers around the world. Since the curb decision was sudden, several shipments of rice got stuck at Indian ports. However, the Government Of India to help rice traders deal with the decision decided to extend the deadline for the shipments of broken rice from Sept. 15 to Sept 30.