Explained | The ban on the export of broken rice

How is the ethanol blending programme connected to the rice export ban?

The story so far: On September 9, the Centre instituted a ban on the export of broken rice. Additionally, it mandated an export duty of 20% on rice in husk (paddy or rough), husked (brown rice) and semi-milled or wholly-milled rice. The measures do not affect export of basmati or parboiled rice. The Secretary at the Department of Food and Public Distribution Sudhanshu Pandey stated that the measures would ensure adequate availability of broken rice for consumption by the domestic poultry industry and for other animal feedstock. Additionally, it would sustain production of ethanol that would further assist the successful implementation of the Union government’s Ethanol Blending Programme (EBP). However, the measures may affect countries dependent on Indian food exports in the face of a lost ‘breadbasket’ in Ukraine owing to the Russian conflict.

The lower the supply of a commodity, the higher would be the price of a product, which results in inflationary pressures. The adequacy of rice stocks in the country would ensure that markets do not experience excess demand and thus, trigger an abrupt price rise. For seven consecutive months, inflation has been above the Reserve Bank of India’s 6% tolerability threshold. The Consumer Price Index (CPI), or retail-based inflation, stood at 7% in August this year with rural and urban inflation scaling 7.15% and 6.72% respectively. This was furthered by an uptick of 7.62% in food prices during the same period.

The COVID-19 pandemic also had an impact on India’s previously held surplus. As a reaction to the distresses caused by the pandemic to the vulnerable sections the Union Cabinet had introduced a food security program, called the Pradhan Mantri Garib Kalyan Anna Yojana (PM-GKAY) in March 2020. The scheme provisions an additional 5kg ration per person each month in addition to their normal quota of foodgrains under the National Food Security Act. In March, the scheme was extended for another six months until September 2022.

The Hindu Businessline had reported this week that foodgrain stocks (including rice, wheat and unmilled paddy) in the Food Corporation of India (FCI)’s central pool had dropped 33.5% on a year-over-year basis to 60.11 million tonnes as of September 1 — prompting doubts on the continuation of the scheme. Research analysts at Nomura observe that on the whole, though rice stocks should remain above buffer levels, the current export restrictions may not necessarily improve the demand-supply situation materially, implying, that there remains an upside risk to the price of rice. “As such, we believe there is a risk that further curbs on rice exports could be imposed, particularly in categories still exempted,” it states.

The major rice cultivation season in India is the Kharif season, that entails sowing the crop during June-July and harvesting them in November-December.

It is imperative to note that rice is a water-intensive crop which also requires a hot and humid climate. Thus, it is best suited to regions which have high humidity, prolonged sunshine and an assured supply of water. It is for this reason that the eastern and southern regions of the country, with sustainable humidity and suitable mean temperatures are deemed favourable for the crop. While the two regions are able to grow paddy crops throughout the year, higher rainfall and temperature prompt the northern regions to grow only one crop of rice from May to November. Andhra Pradesh, Telangana, Punjab, Haryana, Chhattisgarh, Odisha, Madhya Pradesh, Tamil Nadu, Maharashtra, Uttar Pradesh and Bihar are among the rice producing States in India.

A perusal of Indian Meteorological Dept’s data, between June 1 and September 14 illustrate that Uttar Pradesh, Jharkhand, Punjab and Bihar have experienced deficient rainfall. The latter refers to rainfall being 20-59% below normal in a particular region. Although West Bengal, the country’s largest producer, has overall experienced a normal rainfall, its major productivity areas such as Nadia, Burdwan and Birbhum have had deficient rainfall. This indicates a potentially lower produce this year.