Basmati paddy price firms up on lower harvest, steady demand

CHANDIGARH: The price of basmati paddy — the premier long grain rice in its unshelled form — has increased 30-45% from last year as farmers harvest a lower output in India, the largest producer and exporter, even as demand remains steady globally. Traders expect the price to remain firm through this season.

Unshelled basmati is trading between Rs 26 and 45 per kilogram in Punjab during the ongoing harvesting season. Farmers are receiving higher value this time for 1509 basmati variety as well compared to the last year when it sold around Minimum Support price.

India exports the rice to more than 130 countries. Its price has firmed up after remaining subdued for two seasons. Low prices had led farmers in Punjab, Haryana and Uttar Pradesh to sow less basmati this year.

“A drop of around 7% in area under basmati in India will buttress prices while the international demand is expected to remain stable at around 4 million tonnes,” Basmati Export Development Foundation director AK Gupta told ET. Demand from traditional markets Saudi Arabia, Iran, the UAE and the US is expected to remain normal, he said.

“Steps taken by the Indian government, including restrictions on allowing exports through Documents against Acceptance (a credit arrangement), have also helped push up basmati export prices,” said Vijay Sethia, president of the All India Rice Exporters Association.

Restrictions on Documents against Acceptance has reduced defaults by overseas companies, but the Indian government still needs to blacklist some of the firms that have blocked payments causing heavy financial losses to Indian exporters, he said.

According to Sethia, implementation of GST will help boost exports as it has put an end to wide disparity in state levies that were hurtling exporters.

“The prices are expected to remain firm throughout the harvesting season as carryover stocks are low and output is less than normal,” said Arvinder Pal Singh, director at Amar Singh Chawal Wala that owns the Lal Qila rice brand.

Haryana-based Dunar Foods’ CEO, Sandeep Singla, said basmati output could reduce 8-10% this year. “The export prices are bound to rise in this scenario,” Singla added.

But despite this revival in price, basmati traders in Punjab said they were hurt by higher payment towards market development fee and rural development fund (RDF).

A few weeks ago, the Punjab government increased the market fee and RDF from 2% to 3%. It is expected to favour millers and traders based in Delhi, Rajasthan and Haryana where the cost is much less, traders in Punjab said. “The higher levy will ultimately affect farmers who will end up earning less remuneration,” Pal said.

To protest against the increase, rice millers in Punjab have called for a strike on October 5-6. “The government needs to cut RDF and market fee to comparative levels, else an indefinite strike will be held after October 26,” a miller said.

[ Oct 04, 2017]