What are the regulations with respect to rice prices? | Explained Premium

Indian government mandates rice stock declaration, launches "Bharat rice," but traders and farmers doubt effectiveness in controlling prices.

The story so far: The Indian government recently made it mandatory for all traders, wholesalers, retailers, and millers to declare their respective rice stocks. The government has also announced the launch of “Bharat rice” to bring down rice prices in the market. However, millers and traders feel these are not enough to control prices.

In the year 2022-2023, India produced 135 million tonnes of rice, which is 62.84 lakh tonnes higher than the previous year. However, the year 2023-2024 is seeing multiple estimates coming in. The southern States, which are also the major rice consuming States, are said to have suffered a drop in paddy production because of inadequate rainfall. In Tamil Nadu, the production may drop by almost 30% and in Karnataka, there is almost 25% decline, claim traders and farmers. However, in the north, trade sources say, rice production (basmati and non-basmati) is up 15%. The Union government said that there are ample stocks with the Food Corporation of India and that Kharif crop is good. For the Rabi crop, area under paddy as of February 2, is 39.29 lakh hectares compared to the 40.37 lakh hectares last year.

The retail price of rice has increased by 14.51% in the last one year. While Basmati rice prices are said to have dropped 15% in the last one month, paddy prices are up in the southern States. The prices of some varieties increased by more than ₹10 a kg between November 2022 and November 2023. Of the nearly 430 varieties of rice produced in the country, the rice inflation is high in the varieties that is largely preferred by consumers. In States such as Tamil Nadu, farmers who have the capacity to hold stocks and sell to private traders, are expecting better prices this year.

The government has asked traders, wholesalers, retailers, chain retailers and millers to report the stocks online in the categories of broken rice, non-basmati white rice, par-boiled rice, basmati rice, and paddy. It has also launched the retail sale of ‘Bharat Rice’ to general consumers at ₹29 per kg. Moreover, in September 2022, the export of broken rice was banned, and a 20% duty was imposed on par-boiled rice. Non-basmati white rice exports was also put under the prohibited category from July 2023. The government has procured 600 lakh tonnes of paddy during the current Kharif marketing season, starting October 1, 2023. With this, the central pool has 525 lakh tonnes of rice as against the annual requirement of almost 400 lakh tonnes for welfare schemes. Till the end of January this year, the government has sold 1.66 lakh tonnes of rice in the open market.

Traders and millers cite several reasons for the higher retail rice prices. The Minimum Support Price for rice has gone up in the last five years and the cost of transport, storage, etc. are also escalating. In rice consuming States, the varieties consumed in large quantities have seen a drop in production this year. Further, despite government measures, export of non-basmati rice has seen a multi-fold jump during the last three years compared to the previous years. Non-basmati rice exports were 5.1 million tonnes in 2019-2020 which increased to 13.1 million tonnes in 2020-2021, 17.3 million tonnes in 2021-2022, and 16.1 million tonnes in 2022-2023. In April-May 2023-2024, it was 2.8 million tonnes compared to the 2.7 million tonnes for the same period a year earlier. The export duty levied by the government is neutralised by the high international prices, say the traders. Furthermore, the rice consumed in the retail market is of the stock of last season and with a shortfall in arrivals, the prices may go up even more in the coming months.

According to the millers in the northern States, there is a demand for rice for consumption, ethanol production, and cattle feed. The government should prioritise sale for consumption. The stock data collected by the government is expected to give an indication of the stock levels. It should look at capturing data for the most consumed varieties too before deciding the future course of action.