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India Mulls Extending Parboiled Rice Tax, Heightening Global Supply Concerns

Parboiled rice tax

India, the leading rice exporter worldwide, is contemplating an extension of export taxes on parboiled rice as part of its strategy to alleviate food inflation ahead of imminent national elections. This deliberation, if enacted, could exacerbate concerns over global rice supply, potentially propelling prices to unprecedented levels.

Sources familiar with the matter revealed that Prime Minister Narendra Modi's government is weighing the option of maintaining the export levy at 20%, with no immediate plans to prohibit exports of parboiled rice. The current tax regime is set to expire on March 31. However, discussions on this matter are confidential, and the sources requested anonymity.

Such a decision could further fuel the surge in benchmark Asian rice prices, which have already reached a 15-year high following India's imposition of restrictions on key rice varieties in 2023. This development would particularly affect countries in West Africa and the Middle East, heavily reliant on India for their rice supply.

The extension of the export tax aligns with the Indian government's aggressive measures to combat food inflation, which soared to nearly 10% in December compared to the previous year. India has previously restricted exports of wheat, sugar, and most rice varieties, while also intensifying efforts to prevent hoarding. Additionally, it has prolonged low import duties on edible oils for another year.

Despite these measures, retail prices of rice in Delhi persist approximately 11% higher than the previous year. In response, Food Minister Piyush Goyal recently inaugurated a program aimed at providing subsidized rice to retail customers nationwide. The government has also been selling wheat flour and chickpeas at rates below market prices.

Parboiled rice, constituting approximately 30% of India's total exports before the imposition of restrictions, undergoes a process involving partial boiling of paddy before milling. This method enhances its nutritional value and alters the texture of the cooked rice. In the 2022-23 period, India held a substantial share of about 40% in the global rice trade.

As India deliberates on extending the parboiled rice tax, stakeholders worldwide, including consumers and governments reliant on Indian rice exports, remain watchful of potential implications on supply dynamics and global rice prices. The outcome of these discussions holds significant ramifications for the international rice market amidst escalating concerns over food security and inflation.

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