Will rice export fall prey to inflation?

Will rice exporters also fall prey to the inflation? That is one thing which is worrying the non-Basmati rice exporters across the country.

With the country getting a good crop and stocking up enough for the public distribution system (PDS), exporters were hoping that the Centre would allow them to export non-Basmati rice soon.

But, then cam the inflation figures of 11.05 for the week ended June 7. This has come as a rude shock for the trades as they now fear that the government may now allow them to export rice.

The Centre had banned the export of non-Basmati rice following an unprecedented rise in inflation rates. It has now touched a 13-year high of 11.05%.

According to officials, the commerce ministry had been supporting resumption of exports of some 4 million tonnes of rice but the food ministry was opposing it.

Moreover, government’s rice stocks by October 1, 2008, the first day of the new kharif season, are estimated to be just above the buffer norm.

That was the projection of the food grain procurement arm, FCI, earlier this month. That would leave an adequate level of rice buffer stocks to cover food security and welfare programmes, but only just, and certainly not enough to consider exporting 3-4 million tonne.

The difference between the buffer norm and the actual stocks would be much narrower by October, which is when the new marketing season begins.

Not surprisingly, the talk of rice (especially non-Basmati) exports has triggered a quiet nervousness within the food ministry.

Grain prices have played a key role in keeping inflation figures at a 13-year high. Precisely on account of this, the government estimates on crop production have time and again been vulnerable to arbitrary and constant revisions, given their political and GDP implications.

Retail prices have jumped by an average Rs 4-7/kg but the impact has been felt more on the non-Basmati front.