Indian Govt may hike MEP for basmati rice to $900 per tonne

Under intense pressure to review the EGoM decision to drastically reduce the floor export price for basmati to $800 from $1100 per
tonne, the government is considering hiking the Minimum Export Price (MEP) for the premium rice to $900 per tonne. That, however, may not radically allay the apprehensions over a possible tight supply and, as crucially, retail price situation in the domestic market.

Exporters have represented to the commerce ministry that India would likely lose its market share in basmati rice export if the government delays notifying the cut to $800 per tonne in MEP. That decision is yet to be notified by the Director General of Foreign Trade. They have also maintained that Pakistani basmati, sold at lower than $1100 per tonne to undercut Indian basmati, is flooding traditional Indian basmati markets abroad.

However, detractors and sectoral monitors have pointed out that reducing the MEP to $800 per tonne would not only plunge basmati brand equity and price internationally on a longer term but also pressure down farmer prices for the premium variety from exporters for long. Exporters, though, could continue to sell the basmati at much higher prices internationally. What is significant, though, is that Pakistan's commerce ministry pegged its MEP (in May this year) for Basmati higher than $1100 per tonne, on the logic that this would reinforce the quality and brand equity of Pakistani basmati and position it at a far higher quality than Indian basmati.

Crucially, the floor would allow other non-basmati, premium rice to go out of the country in quantities that could impact negatively on both their availability and price within the country. Curiously enough, the price of Thai Hom Mali rice, whose quality is not comparable with that of basmati, is pegged at around $750-800 per tonne in international markets.

Projections are that India could export nearly 2-2.5 million tonnes of rice under the basmati label out of the country this year, since much more non-basmati acreage has gone under basmati this year, thanks to poor and delayed rains. Basmati planting occurs relatively later than other paddy. A good chunk of this year's basmati exports could comprise the Pusa 1121 variety which was christened a basmati variety only recently.