Rice exporters in India, the world’s second largest producer of rice are struggling to keep up with the orders due to reduced availability of containers and workers at mills and ports on the east coast ever since COVID-19 cases started spiking in the region. We look at the impact and the possible challenges and suggestions for the sector in the times ahead.
With shipments struggling to pick up pace, India’s rice exporters are combatting problems of workforce and supply limitation and a prolonged delay might lead to rivals like Thailand and Vietnam raising supplies in the short term, according to industry officials.
This may also lead to heightened global prices amidst the situation of the pandemic.
Need to modify FCI’s procurement strategies
A panel of experts on agriculture exports are of the opinion that in order to boost India’s non-basmati rice exports, the Centre needs to ensure that a higher pool of surplus rice is available to exporters by suitably modifying Food Corporation of India’s (FCI) procurement strategies.
The panel was constituted by the 15th Finance Commission (FFC) to suggest measurable performance incentives for States to promote agriculture exports and also crops that can help in high import substitution.
Impact of the rise in Minimum Support Price
Another reason attributed to the otherwise stagnant production and export of rice in India is the annual increase in the Minimum Support Price (MSP) it is leading to smaller export surplus and uncompetitive pricing in the international market for Indian non-basmati rice.
The panel seemed to suggest that excess FCI buying and increasing MSPs are the major pain points for Indian rice exports which could be addressed through suitable government policies.
FCI is the largest buyer of rice in the domestic market for Public Distribution System (PDS) – approx. 40 million tonnes annually, as per the panel.
The panel has identified the crop value chains out of a laundry list of over 340 agriculture commodities and products that demand attention and development to enable India increase its agriculture exports from the current $40 billion to over $70 billion in the next few years.
This push will enable an estimated investment of around $8-10 billion in inputs, infrastructure, processing and other demand enablers which will in turn create an estimated 7-10 million additional jobs. Such a boost to exports will also lead to higher farm productivity and farmer incomes.
The lack of available workforce has also added more woes to the production. A majority of the labourers have taken to showing up only on day shifts and not on night shifts, thus affecting productivity.
“Labourers are working only on day shifts and not doing night shift,” Mr Rao said.
Rice exports might go down by 100,000 tonnes per month
In the coming months, it is feared that India may have to export around 100,000 tonnes less rice per month as the labour shortage means rice mills are operating at lower capacity.
The problem of limited availability of containers has also affected Rice exporters operating outside Andhra Pradesh, shares Mr Ashwin Shah, director at Shah Nanji Nagsi Exports Pvt. Ltd, an exporter based in Nagpur.
Although there has not been a significant impact in the demand, there are logistical problems in executing export orders, he says.
Private sector as a beacon of support for state-led export plan
The panel also suggested the creation of a state-led export plan with the private sector playing the role of an anchor while the Centre acts as an enabler.
Since private sector players had a paramount role to play in enabling demand orientation, ensuring project plans are feasible, robust, implementable and appropriately funded.
Rice is among the biggest agriculture exports from India along with buffalo meat and cotton. It was India’s single largest commodity with $7.3 billion trade surplus followed by shrimp ($4.6 billion) and bovine meat ($3.6 billion), the panel observed.
Rice production in India is estimated to be over 115 million metric tonnes (which includes 6-7 million tonnes of basmati rice).