India has been the world’s top rice exporter since the beginning of this decade.
But this boom has benefited only merchant capitalists, not consumers and producers
What is the status of India’s rice trade?
India emerged the world’s largest rice exporter in 2011-12, displacing Thailand from its leadership position.
As opposed to exports of around 1,00,000 tons of non-basmati rice in 2010-11, exports soared to 4 million tons in 2011-12.
Exports of basmati rice in those two years stood at 2.3 and 3.2 million tons respectively.
The continuous increase in exports of non-basmati varieties since then, to 8.2 million tons in 2014-15.
After a fall to 6.4 million tons in the subsequent year, a rise again to 8.6 million tons in 2017-18.
The consequent increase in domestic prices obviously reduced the incentive to sell in export markets rather than to the government or in the local market.
India was a major beneficiary, recording a sharp increase in exports of non-basmati varieties.
India’s share in world exports in recent years (2014-18) has stayed at 25-26 per cent, Thailand’s has fluctuated between 22 and 25 per cent, and Vietnam’s between 13 and 16 per cent.
What is the reason behind such trend?
Union government at 2011-12, decide to lift a four-year ban on exports of non-basmati varieties of rice, paving the way for a rise in exports of those varieties.
The then Thai government also decided to favor farmers by strengthening a Rice Pledging Scheme under which it promised to procure unlimited stocks at an enhanced price that reflected a 50 per cent increase over 2010.
Despite significant price difference between basmati and non-basmati rice varieties, the difference in foreign exchange earned from exports of these varieties has narrowed considerably.
The increase in non-basmati exports occurred despite the fact that the enhanced pledging scheme in Thailand was suspended in early 2014, that production in India did not rise much till 2016-17.
What are the significant outcomes?
The exports to production ratio for rice in India rose from 2.4 per cent in 2009-10 to 6.8 per cent in 2011-12 and 9.6 per cent in 2012-13, after which it has fluctuated between 9.9 and 11.3 per cent.
In normal circumstances, this should have resulted in a degree of price buoyancy in domestic markets, and discouraged exports.
But the incentive to export seems to have remained high and persistent.
Due to this over a relatively long period domestic demand for rice has remained below domestic availability, even after taking rising export ratios into account.
The minimum support price (MSP) (adjusted for the paddy to rice conversion) at which rice was procured by the government, presumably setting a floor to market prices, rose over time but remained consistently below the export price for Grade A rice from India until mid-2015
So rather than the procurement price, it may be the quantum of procurement that has been kept at levels that have not affected the incentive to export rice.
This limited effect of procurement on the incentive to export is reflected in the relationship between the export price and wholesale prices in three metro cities, for example.
Wholesale prices have more or less matched the export price in Delhi and Mumbai, though the wholesale price in Chennai is afflicted by unusual volatility that needs a separate explanation.
Going by this trend, it appears that after non-basmati exports were liberalized, the international price has set the range of domestic prices, resulting in an implicit calibration of domestic prices with border prices.
How this trend favored capitalists instead farmers?
Domestic demand for rice has remained below domestic availability, despite the rising share of exports to domestic production.
This subdued demand hits farmers, who find cultivation increasingly unviable despite rising rice exports.
Moreover, the benefit of a “disciplining” international price does not seem to have accrued to consumers.
Retail prices in all metropolitan cities have remained well above the export price showing high and rising distribution margins.
So the liberalization of the rice trade seems to have benefited only one section, the merchant capitalists, and not the actual producers or consumers
