New Delhi: The Government’s decision to lower the minimum export price (MEP) of basmati from $1200 a tonne to $1000 a tonne and simultaneously impose an export duty of $200 or Rs 8,000 per tonne on basmati rice exports has derailed the predominantly export-oriented industry’s business calculations.
The Finance Minister, P. Chidambaram’s proposal while replying to the Finance Bill 2008 in the Lok Sabha relating to basmati rice export duty is construed as a move to garner revenue to the exchequer at a time when the Government is compelled to cut down customs duty on a whole range of mass consumption items in recent months as part of its anti-inflationary strategy.
Latest official figures based on provisional statistics show that the country exported basmati rice worth Rs 3,240 crore during the first eleven months of the current fiscal, against Rs 2,482 crore in the corresponding period of 2006-07, clocking a growth rate of 31 per cent.
The All-India Rice Exporters Association President, Vijay Sethia, told Business Line here that ever since the international rice prices had been on the high from October 2007 onwards, the Government has been periodically pushing up the MEP on basmati rice several times with the last revision at $1200 a tonne MEP for basmati rice.
Little for manoeuvring
Sethia said normally rice exporters undertake contracts on a committed volume and price with the latter being invariably lower than the spot market price.
They have little room for manoeuvre to bear the extra export duty burden cast on them. As 90 per cent of the country’s basmati rice is exported, this sort of additional duty burden and periodic hike in MEP caused a big dent on the contractual obligations of exporters, weaning the importers away from Indian suppliers in the global grain markets.
Sethia felt that if this sort of sustained assault is upon the basmati rice export industry, India’s rivals such as Pakistan, Vietnam and Thailand would capture a large chunk of the traditional markets built and nurtured by domestic industry over long years.
Industry sources further said the blanket ban on export of non-basmati rice early this month has already taken a toll on the export of Pusa 1121 basmati rice, which conforms to all quality parameters of basmati rice but falls technically in the category of non-basmati rice in the absence of a proper definition of what constitutes basmati rice.
Non-Basmati shipments
Given the ground reality that the production of Pusa 1121 rice variety was around 60 per cent of the crop size of basmati paddy of the kharif 2007, the recent ban on non-basmati but premium variety would suck out 60 per cent of export of basmati rice from the country. With the ban in vogue, trade sources reckon that already the Government has prevented export worth about two lakh tonnes of Pusa 1121 basmati rice for the later period of the crop year.
Sethia contends that growers of Pusa 1121 account for a lion’s share in the export market and farmers who have been growing this basmati variety were getting an annual return of Rs 50,000 to Rs 60,000 per acre and with the ban on this rice and slapping of export duty on basmati rice, these growers’ annual income would get pruned to Rs 20,000 per acre, affecting their livelihood security and pushing them to press for loan waiver or other sops.
Echoing similar apprehensions, another important rice exporter KRBL Chairman, Anil Mittal, said that as it is the raw material cost of cultivating rice accounts for 70 per cent and other overheads including logistics and packaging cost another 25 per cent with the industry being left with a margin of 5 per cent. If on this wafer-thin margin, a huge burden like 20 per cent tax is added, the industry could only denude its capital to stay in the fray to export.
The Finance Minister, P. Chidambaram’s proposal while replying to the Finance Bill 2008 in the Lok Sabha relating to basmati rice export duty is construed as a move to garner revenue to the exchequer at a time when the Government is compelled to cut down customs duty on a whole range of mass consumption items in recent months as part of its anti-inflationary strategy.
Latest official figures based on provisional statistics show that the country exported basmati rice worth Rs 3,240 crore during the first eleven months of the current fiscal, against Rs 2,482 crore in the corresponding period of 2006-07, clocking a growth rate of 31 per cent.
The All-India Rice Exporters Association President, Vijay Sethia, told Business Line here that ever since the international rice prices had been on the high from October 2007 onwards, the Government has been periodically pushing up the MEP on basmati rice several times with the last revision at $1200 a tonne MEP for basmati rice.
Little for manoeuvring
Sethia said normally rice exporters undertake contracts on a committed volume and price with the latter being invariably lower than the spot market price.
They have little room for manoeuvre to bear the extra export duty burden cast on them. As 90 per cent of the country’s basmati rice is exported, this sort of additional duty burden and periodic hike in MEP caused a big dent on the contractual obligations of exporters, weaning the importers away from Indian suppliers in the global grain markets.
Sethia felt that if this sort of sustained assault is upon the basmati rice export industry, India’s rivals such as Pakistan, Vietnam and Thailand would capture a large chunk of the traditional markets built and nurtured by domestic industry over long years.
Industry sources further said the blanket ban on export of non-basmati rice early this month has already taken a toll on the export of Pusa 1121 basmati rice, which conforms to all quality parameters of basmati rice but falls technically in the category of non-basmati rice in the absence of a proper definition of what constitutes basmati rice.
Non-Basmati shipments
Given the ground reality that the production of Pusa 1121 rice variety was around 60 per cent of the crop size of basmati paddy of the kharif 2007, the recent ban on non-basmati but premium variety would suck out 60 per cent of export of basmati rice from the country. With the ban in vogue, trade sources reckon that already the Government has prevented export worth about two lakh tonnes of Pusa 1121 basmati rice for the later period of the crop year.
Sethia contends that growers of Pusa 1121 account for a lion’s share in the export market and farmers who have been growing this basmati variety were getting an annual return of Rs 50,000 to Rs 60,000 per acre and with the ban on this rice and slapping of export duty on basmati rice, these growers’ annual income would get pruned to Rs 20,000 per acre, affecting their livelihood security and pushing them to press for loan waiver or other sops.
Echoing similar apprehensions, another important rice exporter KRBL Chairman, Anil Mittal, said that as it is the raw material cost of cultivating rice accounts for 70 per cent and other overheads including logistics and packaging cost another 25 per cent with the industry being left with a margin of 5 per cent. If on this wafer-thin margin, a huge burden like 20 per cent tax is added, the industry could only denude its capital to stay in the fray to export.
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