In a remarkable turn of events, India's rice stocks have surged to unprecedented levels, prompting a crucial question: Is it time to lift the existing export restrictions? With government granaries brimming and inflation still in double digits, easing these restrictions might just be the key to restoring balance in the market.
A Bumper Harvest on the Horizon
Thanks to favorable monsoon conditions, India is on track to achieve its rice production target of 136.30 million tonnes (mt) this year. After a somewhat deficient monsoon in June, July and early August brought widespread rains, alleviating concerns and paving the way for a potentially record-breaking harvest. If these conditions persist through August and September, the nation's rice production could hit the mark, further swelling the central pool stocks.
Even Punjab, which has experienced a 43% rainfall deficiency, is unlikely to see a significant dip in rice output, though the long-term implications for groundwater resources are concerning. Haryana, in response to the rain deficit and upcoming state elections, has announced a bonus of ₹5,000 per hectare for all kharif and horticulture crops, further encouraging high production levels.
The Inflation Paradox
Despite the bumper harvest and government-imposed export restrictions, rice inflation has remained stubbornly in double digits since October 2022. With the central pool stock reaching 45.48 mt as of August 1, 2024, far exceeding the buffer norm of 10.25 mt, it's clear that the high procurement levels are squeezing supply in the private market, driving up prices.
Exploring the Options
The government now faces the challenge of managing this excess stock without further distorting the market or violating international commitments. Here are the potential solutions:
Export from Central Pool Stocks: However, under the WTO's peace clause, India must avoid actions that could distort global trade, including exporting from government stocks.
Sale Under Open Market Sale Scheme (OMSS): Unlike wheat, rice lacks large-scale bulk buyers, making this option less effective.
Distribution as Bharat Rice: Subsidized sales through Nafed, NCCF, and Kendriya Bhandars could alleviate some pressure, though their distribution networks are limited.
Additional Allocation Under PDS: While this approach worked during the COVID-19 pandemic, the limited wheat stock in the central pool makes it a less viable option this time.
Allocate Rice for Ethanol Production: Although this has been done in the past, using a water-intensive crop like rice for ethanol blending is not considered a sustainable policy choice.
Remove Export Restrictions: Lifting the restrictions on non-basmati rice exports appears to be the most practical solution. It would ease the burden on government procurement agencies, allowing the private market to operate more freely and potentially bringing down inflation.
A Call for Policy Action
As India approaches the Kharif Marketing Season (KMS) for 2024-25, it is imperative that the government swiftly decides on its course of action. Allowing non-basmati rice exports would give private traders sufficient time to secure orders in the global market, easing the pressure on domestic prices.
For the long-term, a shift in focus from rice to the cultivation of pulses and oilseeds could be a more sustainable policy, addressing both water scarcity and nutritional needs.
In conclusion, with rice stocks at record levels and inflation on the rise, the time is ripe for the government to reassess its policies and consider lifting export restrictions. This move could not only balance the domestic market but also position India as a key player in the global rice trade.
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