India to adjust restrictions on rice trade owing to a huge surplus

The government, last year, had put stringent controls in place including a ban on certain non-basmati rice exports and setting a minimum export price (MEP) of $950 per tonne for aromatic long-grain Basmati rice. These measures were part of a broader strategy to stabilize domestic rice prices which have seen a double-digit inflation rate since October 2022. However, with the recent favorable monsoon rains contributing to a 6% increase in paddy sowing area this year, potential recalibration of these restrictions is expected.

Currently, the Food Corporation of India (FCI) holds about 47.01 million tonnes (MT) of rice, with 32.98 MT in stocks and an additional 14.12 MT expected from millers. This amount vastly exceeds the buffer requirement of 10.25 MT set for October 1. Hence, a group of ministers is scheduled to convene to explore various avenues for reducing this surplus, which includes ramping up exports and offering more rice at subsidized rates to states.

Commerce and Industry Minister Piyush Goyal hinted at a potential relaxation of the ban on some non-basmati rice varieties, contingent on an assessment of the ongoing demand-supply dynamics and price situations. Additionally, there is talk of reducing the MEP for Basmati rice to facilitate increased exports.

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On the domestic front, efforts to diminish the rice surplus include selling rice at reduced prices to bulk buyers. Despite a lackluster response last fiscal year, where only about 0.1 MT was sold at Rs 29 per kg, the FCI plans to initiate sales at Rs 28 per kg to bulk purchasers starting next month. Moreover, rice will be provided at Rs 24 per kg to agencies like Nafed, NCCF, and Kendriya Bhandar, which will then sell it at a subsidized rate of Rs 29 per kg under the Bharat Rice Initiative.

These initiatives reflect a dual strategy to manage the rice surplus effectively while addressing the inflationary pressures that have burdened consumers. The government's flexible approach, adjusting export regulations and enhancing domestic availability at subsidized rates, is indicative of its adaptive management of agricultural resources in response to fluctuating market conditions and climatic factors.