The Directorate General of Foreign Trade (DGFT) has sought details of the rice stranded at ports for which Indian exporters had entered into agreements with global buyers before the government imposed a 20% export duty on September 9.
Nearly 1 million tonnes of rice is stuck at the ports and container freight stations following the government’s decision, which came as a sudden blow to the rice trade. Exporters are concerned over the stranded consignments and have urged DGFT to allow the shipments to move to their destinations.
India banned exports of broken rice and imposed a 20% duty on exports of various other types on September 8 and the regulations became effective from September 9, giving the trade no chance to take some action.
“We have met the officials of DGFT as well finance ministry to sort out the issue. DGFT has sought details of exports and whether these exports are backed by letters of credit (LCs) or not. We have submitted details, but we are yet to hear from them,” said Vinod Kaul, executive director of All India Rice Exporters Association (AIREA).
The new duty is expected to discourage foreign buyers from making purchases from India and they are likely to turn to other rice-producing countries like Thailand and Vietnam, which have been struggling to increase shipments and prices, exporters said.
“While LCs for their shipment were opened before the new export duty notification, exporters are worried that the authorities might demand export duty on the same. In that case, exporters may incur big losses as their international buyers would not want to foot the bill. We have also asked DGFT to allow shipments of the rice for which we had entered into contract before the export duty and the ban came in,” said B.V. Krishna Rao, president of The Rice Exporters Association (TREA).
In the past, New Delhi has provided exemptions for contracts backed by LCs or payment guarantees in similar circumstances, issued until the day the government made a policy change, the rice exporters said. New Delhi allowed exports against already-issued LCs when it banned wheat exports earlier this year.
India ships around 2 mt of rice every month from across all the ports in the country.
“The government’s move will impact exports of non-basmati rice from the country and it is likely to drop to 10-11 mt from 17.26 mt in FY22, Rao said.
Suraj Agarwal, CEO and cofounder of rice marketing and exporting company Rice Villa Foods, said the export duty has been levied so that the government can ensure sufficient rice stock for the Public Distribution System (PDS).
Lesser rains in major rice-producing states of Uttar Pradesh, Bihar, Jharkhand and West Bengal have impacted paddy acreage this kharif season, increasing the price of the staple across the country.
According to government estimates, the country’s rice production could fall by 10 mt this year. In FY22, India had produced 111.7 mt of rice during kharif season.
Export duty has also been levied on broken rice since it is used in ethanol production.
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