India Rice situation calls for ‘multiple’ strategies

The Prime Minister's Economic Advisory Council's caution over food price flare-up in the backdrop of large acreage losses under kharif foodgrain – the major crop being rice – is a timely reminder that all is not well on the rice front.

EAC's prescription that an appropriate policy response ought to draw from "multiple sources" is a tacit and tactical call to the authorities to beef up the food security position in general and rice security in particular.

It has urged the Government to ensure strong output of rice in rabi crop, availability of rice in various pockets of the country where rice is predominantly consumed as a staple dietary item through public distribution system in order to reduce pressure on prices and arrange by way of precaution 'some' unspecified quantities of rice through imports.

Rising prices

It may be noted that between September 2008 and May 2009, rice price had risen by 16 per cent, much before there was any hint about the aberrant pattern of the south-west monsoon. But thereafter, rice price has risen barely by one per cent. Rice harvest of 2008 was a record of over 99 million tonnes (mt), some three million tonnes more than in the previous year. The country's rice output had been logging a steady trend rate of about 3 per cent over the past five years. Public stocks were over 20 mt in April and May 2009 and procurement levels were running comfortably close to 20 per cent more than in 2008.

The restrictions on exports of non-basmati rice still remains in force, which was imposed in April 2008 in the wake of worst flare-up in global food commodity prices.

Against this backdrop, the assessment of shortfall of six million hectare crop area this year on the heels of drought meant a shortfall of 12 mt in rice production. But in its September Rice Market Monitor, the FAO has downgraded its 2009 production forecast for India to 121.5 mt (81 mt, milled basis). Thus between last year record output of 99 mt and the forecast 81 mt this year, the shortfall is a substantial 18 mt. What is worse the quality and yield of rice output could be hit by arid climate.

Considering the fact that procurement in the first 19 days of this month by Food Corporation of India has declined by 14 per cent. As the state procurement agency has the remit to step up its operations in view of its assured supply commitment to UPA's flagship NREGA programme, the options for the Government are not many other than arranging to meet the supply shortfall through imports. If this is exercised to beef up rice supply position domestically, India's entry into the global market would shore up prices in view of the thin volume of global trade in rice with only a handful of players.

Domestic supply

Policy analysts contend that Government should augment domestic supply of rice and think over substitute food products such as wheat, maize and pulses. It could also alongside weigh the policy intervention strategy it used with wheat and edible oils when there was a greater shortage and global prices zoomed by banning exports of all varieties outright besides bringing down import duty to nil.

But unlike wheat export, India has an organised set-up in rice exports in view of its premium rice variety basmati in the overseas markets.

In fact, its explicit recognition of non-traditional basmati variety such as Pusa 1121 as basmati has boosted basmati exports from India substantially to the extent of 1.5 mt last year, fetching $2 billion for the country. Hence, officials in the Commerce Ministry told Business Line here that "we are not for any restrictions either quantitative or blanket ban" as growers of basmati get premium price in the overseas markets.

The next few months would keep the authorities on their toes to weigh the pros and cons of multiple options to keep the rice supply situation from worsening.

This is all the more so if the coming rabi crop comes a cropper, aggravating the fragile rice supply situation, food policy experts warn.