India Further Tightens Rice Shipments in Threat to Global Supply

India, the world’s biggest exporter of rice, imposed more curbs on shipments of the grain in a move that’s likely to further squeeze global supplies of the food staple.

(Bloomberg) — India, the world’s biggest exporter of rice, imposed more curbs on shipments of the grain in a move that’s likely to further squeeze global supplies of the food staple.

The government will set a floor price of $1,200 per ton for basmati rice exports, according to a commerce ministry statement. That will prevent some traders from trying to smuggle non-basmati white rice, which has been banned for exports, through customs masked as the more expensive aromatic variety, the government said on Sunday.

The latest move follows the imposition of a 20% export tax on parboiled rice on Friday, confirming an earlier report by Bloomberg News. India, which had a share of about 40% in the global rice trade last year, has now either banned or put some sort of restriction on exports of all varieties of the grain. 

Asian rice prices soared to their highest in almost 15 years earlier this month, and could climb further, raising costs for importers such as the Philippines and some African nations. India’s recent protectionist measures are in line with its aggressive efforts to cool local food prices ahead of a general election early next year, when Prime Minister Narendra Modi will seek a third term.   

With India’s move to put a tax on parboiled rice, domestic prices will drop and that will help the government in controlling food inflation, B.V. Krishna Rao, president of the Rice Exporters Association, said on Saturday. “But, global prices will rise and buyers will have to absorb the increase. There will also be re-negotiations between buyers and sellers on some contracts.”

Rice is a food staple for about half of the world’s population. India’s curbs come at a time when food costs are still elevated because of Russia’s war in Ukraine and as volatile weather across the world threaten supplies of grains and oilseeds. There are concerns India’s measures to ensure domestic food security will hit several poorer nations still struggling to recover from the Covid-led economic downturns. 

Parboiled rice accounts for about one-third of India’s total rice shipments. The nation has already banned exports of broken rice and non-basmati white rice, curbed shipments of wheat and sugar, and restricted stockpiling of some crops. India is also considering abolishing a 40% import levy on wheat, and selling tomatoes, onions and grains from state reserves to improve local supplies.

Parboiling is a process that involves partial boiling of the paddy before milling to boost its nutritional values and change the texture of cooked rice. Some restaurants use parboiled rice because it is already clean and easy to cook.

The government said that exporters having valid letters of credit before the new rule on parboiled rice will still be allowed to ship the grain. The export tax for the variety will remain in force until Oct. 15, it said.

The commerce ministry said that the decision to set a minimum price for basmati rice shipments was taken after noticing large variations in export prices of the grain. In some cases, the aromatic variety was even sold at $359 a ton, compared with the average export price of $1,214 this month, it said.

Basmati rice contracts with the value of less than $1,200 may be evaluated by a government panel, which will submit its report within one month, the ministry said. 

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