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New Indian Government Unlikely to Lift Export Duty on Parboiled Rice

Duty on parboiled rice expected to stay as it boosts revenues and keeps local prices in check. African consumers have no alternative to Indian parboiled rice.

Export Duty on parboiled rice

With the new Indian government set to be elected on June 4, it is highly unlikely that the 20% export duty on parboiled rice will be lifted. This measure, initially implemented to curb rising food inflation, has since proven beneficial for the Indian government by generating significant revenue without impacting local prices.

Prime Minister Narendra Modi’s administration has recognized the dual benefits of this duty. Beyond its initial purpose, the levy on parboiled rice exports has been a lucrative source of income, contributing millions of USD to the national treasury. This dual advantage means that any expectation for the new government to remove the export duties, even with a forecasted bumper rice harvest in 2024, is misplaced.

The origin of these duties dates back to August 2022, when the Modi government banned broken rice exports and imposed additional duties on non-basmati white rice. By July 2023, the government had further restricted non-basmati white rice exports, imposed a 20% duty on parboiled rice shipments, and set a minimum export price for basmati rice at $950 per metric ton.

As a consequence, Indian rice exports fell by 18.5% year-over-year, amounting to 16.5 million metric tons in the 2023-24 fiscal year. While Indian basmati rice predominantly heads to the Middle East, parboiled rice primarily serves West African markets.

Despite these export duties, Indian parboiled rice remains competitively priced. Data from Commodity Insights reveals that from January 1 to May 29, the daily average Platts assessment for India Long Grain Parboiled Milled Rice 5% STX FOB was $530 per metric ton, significantly lower than the $605 per metric ton for Thai Long Grain Parboiled Milled Rice 100% STX FOB.

“There is no reason for New Delhi to remove duties on parboiled rice as it keeps the local prices in check and the government gets additional revenues,” stated Sandeep Agarwal, business head of rice at Aditya Birla Global Trading, a Dubai-based commodities trading company.

The impact of these duties is particularly felt in West Africa, the largest consumer of Indian parboiled rice. Indian exporters have passed the 20% duty cost onto importers, hitting price-sensitive nations hard. Major importers in West Africa include Benin, Côte d'Ivoire, Togo, Guinea, Somalia, Liberia, and Djibouti, all of which have significant portions of their populations living below the poverty line.

For these countries, Indian parboiled rice is indispensable. Despite the export duties, it remains the cheapest option globally, making it an essential staple for millions. The lack of viable alternatives means that African consumers must endure higher prices or reduce their consumption.

Given these dynamics, the Indian rice trading sector sees no urgency to press the government for a removal of the duties. With Indian parboiled rice maintaining its price competitiveness, it remains a critical source of affordable nutrition for many in Africa.

Market analysts predict that African consumers will continue to face higher rice prices in the near term, as the export duty on Indian parboiled rice is expected to remain in place under the new government.

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