Lack Of Clarity Stalls Pre-Ban Rice Export Commitments

Mumbai: Despite repeated representations at various levels and reports of government decision to ease export controls on non-basmati rice, there is little headway made on the ground, say rice exporters with pending export commitments.

The Assistant Commissioner of Customs at Kakinada port (from where manyshipments are due to take place) has already announced that no loading of non-Basmati rice will take place from the port without further orders. As uncertainty marks the rice export scene, (it is now 10 days since the ban was officially notified), Indian exporters are unable to fulfil their export obligation following imposition of ban on non-basmati rice export.

The ban was actually notified by the Director General of Foreign Trade on October 15, but was made effective from October 9. A question over the legal validity of banning export retrospectively has arisen. The Customs authorities at ports have stopped processing export documents (based merely on the announcement purported to have been made by the Finance Minister on October 9) even without a formal notification in place. These developments have caused considerable anguish among exporters.

Awaiting shipment

An estimated seven lakh tonnes of rice collectively valued at about Rs 850 crore, which are committed for export are awaiting shipment. About four lakh tonnes of rice are lying in various ports across the country to be loaded into vessels, it is pointed out.

Some ships are already waiting to commence loading; but there is no clearance from Customs authorities for want of clear-cut directives from New Delhi.

Risks

Exporters feel that objections are being raised at the export document processing stage and they are exposed to many risks for no fault of theirs. Demurrage and detention charges for vessels add up to a tidy sum. There is apprehension among exporters here that they would be dragged into international arbitration proceedings for shipment default. Non-basmati rice export is usually done on free-on-board (f.o.b) terms and payment is usually against submission of export documents (CAD/DP terms),although in some cases letters of credit have been established too.

Exporters, this correspondent spoke to, asserted that they have sufficient documentary evidence to prove the existence of a pre-ban commitment. For a country that produces nearly 880-900 lakh tonnes of rice, allowing pre-ban commitment of about seven lakh tonnes should not pose difficulty under normal circumstances. But reports circulating in the market suggest poor coordination among the concerned ministries - Commerce, Finance and Agriculture; and the absence of clear-cut directive for honouring pre-ban commitments.

Minimum export price

The government’s consideration of imposing a minimum export price (MEP) for non-basmati rice would also harm rice business.

By imposing a high MEP, the Government would willy-nilly drive exporters to indulge in invoice manipulation, argued an established exporter. “In the past, we have seen such efforts fail”, he added.

“As export markets are cultivated assiduously over time, the least the policy makers should do is to instruct quick clearance of ready-to-ship export cargoes at various ports so that India is not perceived as an unreliable supplier in the global market” is the unanimous refrain of exporters.