139 CHPATER-5 EXPORT, IMPORT AND WHOLESALE PRICE OF RICE IN INDIA 5.1. FACTUAL DETAILS: The policy related to exports and imports of rice and wheat operates within the framework of food security and food management policy. From a situation of heavy dependence on imports of basic staple food in the middle of 1960s, India steered itself to a comfortable situation during the 1990s. The supply-demand balance became visible since the first half of 1980s, when the net imports came down to less than one (0.88) million tonnes. The annual average of net imports of cereals decreased to 0.2 million tonnes in the second half of 1980s. Considering the average for a five year period, India emerged as net exporter of cereals in the early 1990s. Between 1990-91 and 1994-95, India exported an average of 0.5 million tonnes of cereals (mainly rice and wheat). Net exports went up to 2.6 million tonnes per year during 1995-2000, and further to 6.4 million tonnes during 2000-2005. As already mentioned, the duty on imports of rice and wheat was reduced to zero during the crisis period, and even beyond, when India was reeling under high food inflation. This was in a situation of bound rates of 100 per cent on wheat and 70 per cent on semi-milled or wholly milled rice (polished or unpolished). After implementation of WTO agreement in 1993, agricultural exports have undergone significant changes in its content and composition. The availability of cheap labour and land establish the cases of export initiatives and diverse agro-climatic conditions give excellent base for the agricultural production (Brahm and Sharma, 1996). The exports and imports of rice and wheat for the last 10 years show that India imported about 7.9 million tonnes of wheat during 2006-08. However, taking the five year average from 2006-07 to 2010-11, India has been net exporter of rice plus wheat, mainly owing to rice exports, even though the exports of rice went down considerably. During 2008-09, 62 per cent of rice exported from India was basmati rice. The share of basmati rice in total rice exports went up to 94 per cent in 2009-10 and further to 96 per cent in
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139
CHPATER-5
EXPORT, IMPORT AND WHOLESALE PRICE OF RICE IN INDIA
5.1. FACTUAL DETAILS:
The policy related to exports and imports of rice and wheat operates within
the framework of food security and food management policy. From a situation of
heavy dependence on imports of basic staple food in the middle of 1960s, India
steered itself to a comfortable situation during the 1990s. The supply-demand
balance became visible since the first half of 1980s, when the net imports came
down to less than one (0.88) million tonnes. The annual average of net imports of
cereals decreased to 0.2 million tonnes in the second half of 1980s. Considering
the average for a five year period, India emerged as net exporter of cereals in the
early 1990s. Between 1990-91 and 1994-95, India exported an average of 0.5
million tonnes of cereals (mainly rice and wheat). Net exports went up to 2.6
million tonnes per year during 1995-2000, and further to 6.4 million tonnes during
2000-2005. As already mentioned, the duty on imports of rice and wheat was
reduced to zero during the crisis period, and even beyond, when India was reeling
under high food inflation. This was in a situation of bound rates of 100 per cent on
wheat and 70 per cent on semi-milled or wholly milled rice (polished or
unpolished).
After implementation of WTO agreement in 1993, agricultural exports
have undergone significant changes in its content and composition. The
availability of cheap labour and land establish the cases of export initiatives and
diverse agro-climatic conditions give excellent base for the agricultural
production (Brahm and Sharma, 1996). The exports and imports of rice and
wheat for the last 10 years show that India imported about 7.9 million tonnes of
wheat during 2006-08. However, taking the five year average from 2006-07 to
2010-11, India has been net exporter of rice plus wheat, mainly owing to rice
exports, even though the exports of rice went down considerably. During 2008-09,
62 per cent of rice exported from India was basmati rice. The share of basmati rice
in total rice exports went up to 94 per cent in 2009-10 and further to 96 per cent in
140
2010-11. As mentioned in the preceding section, during the last three years,
exports of non-basmati rice were restricted and basmati rice export was allowed
only at a price higher.
Indian Basmati is long grain aromatic rice with a unique, pleasing and
appetizing aroma. It is the aroma that gives basmati its novel characteristics
unmatched by any other rice grain anywhere else in the world. The Punjab,
Haryana, Uttaranchal, Western Uttar Pradesh and the southern part. The climate,
soil and water in this region combine to give Indian Basmati its unique qualities
and characteristics. Its unique quality and characteristics cannot be replicated if
grown anywhere else. In more ways than one, Basmati is nature's gift to the
Indian subcontinent and commands the highest price amongst all the rice varieties
in India. This rice has high analyse content and a firm almost dry texture when
properly cooked. The best Indian Basmati is aged for at least one year to increase
firmness, quality and elongation after cooking. Because of its quality
characteristics, basmati rice fetches a higher price in the international market.
FAO study by Conforti, (2004) indicated a considerable degree of linkage
between India’s domestic and world reference prices. His estimates indicated
evidence of long run equilibrium in the spatial transmission between the domestic
and the world reference prices of wheat, maize, cassava, milk powder, and to
some extent rice. However, fluctuations in world market prices were in general
transmitted to countries export unit values, but not to producer prices due to
government intervention (Hazellet al16., 1990).
Futures trading in rice were suspended by the Forward Market
Commission. On October 9, 2007, a ban on export of non-basmati rice was
imposed (except some organic rice and for food aid). On October 25, 2007: Ban
on export of rice was revised and on export above the Minimum Export Prices
(MEP) of US$ 425 per tonne (F.O.B.) was permitted. In December 2007: the
Minimum Export Prices (MEP) for non-basmati rice exports was raised to US$
500 per tonne. Export of basmati rice was allowed but Minimum Export Prices
(MEP) was imposed at US$ 900 per tonne, to prevent non-basmati rice being
labelled as basmati rice for export. In March 2008, import duty on semi-milled or
141
wholly milled rice was reduced to zero, to augment rice supplies in the domestic
market. In March 2008, Minimum Export Prices (MEPs) for both basmati and
non-basmati rice were further raised. On March 17, 2008, basmati rice exports
were restricted to only two ports (Mundra and Pipavav). The imports of wheat on
government account continued and till March 2008 aggregated to 1.8 million
tonnes (since April 2007). Export of non-basmati rice was permitted on
diplomatic and humanitarian considerations. In February 2011, the government
allowed the export of 1,50,000 tonnes of three premium non-basmati rice
varieties. India exported 2.3 million tonnes of rice, which was mainly basmati
rice, during the year. Depreciation of Indian rupee also helped in increasing
exports. Indian exports reportedly pulled down global prices of rice. The futures
trading continued to remain banned.
At country level, agricultural sector contributed 10.57 per cent of national
exports in 2009-10. India’s agricultural exports have increased from Rs. 6,013
crores in 1990-91 to Rs. 89341.33 crores in 2009-10. Rice, tea, coffee, oil-seeds,
fruits and vegetables, cashew and sugar are the major agricultural exports of India
and have a major the share in world. At the same time, India’s agricultural imports
also have increased from Rs. 1,206 crores in 1990-91 to Rs. 59,528crores in 2009-
10 (accounts for 4.37 per cent in total India’s imports).
Broadly, the present study has been divided into four sections. First
section, understanding the structure of India’s major agricultural exports and
imports in comparison with over the decade. Second consistency of India's Export
Performance in Rice, third section, Impact of Wholesale Prices on Rice in India.
Final section, the existing rice export, import and wholesale prices
competitiveness suggestions and improving the trade competitiveness will be
discussed.
5.2. Trend Analysis in Agricultural Export and Import in India:
At the time of the Uruguay Round negotiations, Indian agriculture was
reasonably competitive (Gulati and Kelley 1999; Gulati. et, al., 1994), so trade
liberalization would not necessarily be expected to have an adverse impact.
Commodities such as rice and wheat, India‘s major staples, turned out to be
142
efficient import substitutes and export competitive for several years. The only
major uncompetitive commodity seemed to be oilseeds and edible oils, which are
produced at high cost in India. Milk was also of concern, although trends in the
1990s were encouraging (Sharma and Gulati 2002).
Table-5.1 Percentage share of Agriculture exports and imports in the total exports and imports of India. (Value in Rupees in Crores)
Source: Director General of Commercial Intelligence & Statistics, Ministry of commerce, Kolkata.
Table-5.1 present share of agricultural Commodities in India’s Imports and
Exports from 1990-91 to 2009-10. The share of agricultural commodities in India’s
total imports has indicated a trend of fluctuation during the two decades in the post
reform period from 1990-91 to 2009-10. Imports of agricultural commodities
fluctuated at a lower level between 1990-91 to 1995-96 a higher of agricultural
Year
% share of agriculture Imports to Total National Imports
% share of agriculture Exports to Total National Exports
1990-91 2.79 18.49
1991-92 3.09 17.80
1992-93 4.54 16.84
1993-94 3.18 18.05
1994-95 6.60 15.99
1995-96 4.80 19.18
1996-97 4.76 20.33
1997-98 5.70 19.09
1998-99 8.17 18.25
1999-00 7.45 15.91
2000-01 5.29 14.23
2001-02 6.63 14.22
2002-03 5.92 13.58
2003-04 6.12 12.70
2004-05 4.55 11.08
2005-06 3.26 10.78
2006-07 3.53 10.92
2007-08 2.95 12.05
2008-09 2.71 10.22
2009-10 4.38 10.59
Co-efficient Variation (CV)
1990-91 to 1999-00 CV 79.56 47.00
2000-01 to 2009-10 CV 50.70 43.99
Compound annual growth rate (CAGR)
1990-91 to 1999-00 CAGR 33.79 18.96
2000-01 to 2009-10 CAGR 15.38 15.32
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imports in total imports is observed between 1996-97 to 2003-04 but here too a
trend of fluctuations is found. However, a declining trend of the share of agricultural
imports in total imports of India is found from 2004-05 to 2009-10.
The share of agricultural exports in total exports from India has been high
during the first decade during the reform era from 1990-91 to 1999-2000 though
there are marginal fluctuations during the decade. The share of agricultural exports
in Indias total export has indicated an almost continuous decline during the decade
from 2000-01 to 2009-10. There is need for enhancing the exports of agricultural
commodities from India. India is one of the major exporter of agricultural
commodities in the world. An all out effort must be made to boost exports,
enhanced exports are needed to boost not only foreign exchange but also for
ensuring better price for producers of agricultural commodities.
5.3. Consistency of India's Export Performance In Rice: Table-5.2 Percentage Share of rice export of agriculture export and rice production
of rice export in India (Value in Rupees in Crores, Produ in million tonnes)
Year Agriculture
Export Rice
Export
% Share of rice
Export in Agri export of India
Rice Produ
Rice Export
% Share of rice
Product in rice export of India
1990-91 6019 462 7.67 74.29 461.6 16.09
1991-92 7895 756 9.57 74.68 755.6 9.88
1992-93 9082 976 10.74 72.86 975.6 7.47
1993-94 12633 1287 10.19 80.30 1286.7 6.24
1994-95 13269 1206 9.09 81.81 1205.8 6.78
1995-96 20344 4568 22.45 76.98 4568.1 1.69
1996-97 24363 3172 13.02 81.73 3172.4 2.58
1997-98 24626 3371 13.69 82.54 3371 2.45
1998-99 25387 6281 24.74 86.08 6280.8 1.37
1999-00 24301 3126 12.86 89.68 3125.9 2.87
2000-01 27288 2932 10.75 84.98 2932.2 2.90
2001-02 28144 3174 11.28 93.34 3174.1 2.94
2002-03 32473 5831 17.96 71.82 5831.2 1.23
2003-04 34616 4168 12.04 88.53 4168 2.12
2004-05 38078 6769 17.78 83.13 6768.9 1.23
2005-06 45220 6221 13.76 91.79 6221.3 1.48
2006-07 57392 7036 12.26 93.35 7035.9 1.33
2007-08 74209 11755 15.84 96.69 11754.6 0.82
2008-09 80649 11164 13.84 99.18 11164.4 0.89
2009-10 84136 11255 13.38 89.13 11254.9 0.79
2010-11 112522 10803 9.60 95.32 10802.83 0.88
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Co-efficient of Variation (CV)
1990-91 to 1999-00 CV 46.38 75.79 -- 6.77 75.79 --
2000-01 to 2009-10 CV 44.26 47.24 -- 8.80 47.24 --
Compound Annual Growth Rate (CAGR)1990-91 to 1999-00
CAGR 18.58 29.20 -- 2.02 29.20 --
2000-01 to 2009-10 CAGR
15.18 17.00 -- 1.59 17.00 --
Source: www.calculated agricoop.com
Table-5.2 provides the detail share of rice exports in agricultural exports and
rice exports as percentage of rice production. The share of rice exports in total
exports of agricultural commodities has gone up during the first five years that is
during 1990s. The share of rice exports reached the peak of 24.74 per cent in
1998-99. However, the subsequent period has witnessed fluctuating trend with a
lower share of rice exports in total exports of agricultural commodities and
reached the lowest at 9.60 per cent in 2010-2011. The share of rice exports in
India’s total rice production has indicated a dismal picture. The share has slipped
down from 16.09 per cent in 1990-91 to 2.90 per cent in 2000-01 and further to
0.88 per cent in 2010-11. The above trend is reflected in the downward movement
of co-efficient of variation (CV) and the compound annual growth rate (CAGR).
The details indicate a discouraging performance of rice exports during the last two
decades. It is necessary for the government to boost rice exports through proper
incentives and though adequate market study in the major rice importing countries
since India as a major rice exporter has faced severe competition from some of the
Asian neighbours.
145
Table-5.3 Percentage Share of Export in Basmati and Non-Basmati rice of export in total rice India (Quantity: in ' 000 Tonne; Value: Rs in Crore)
00 81.08 174.46 90.22 79.56 52.03 36.41 2000-01 to 2009-
10 5.20 124.44 2.21 50.70 64.15 31.10
151
percentage of total food imports were higher between 1990-91 and 1993-94. Then
onwards rice imports as a percentage of total food imports have been negligible or
null except in 2000-01. Agricultural imports as percentage of total imports have
increased almost continuously from 1990-91 to 2003-04. But a declining trend is
observed during the last 6 years i., e. from 2004-05 till 2009-10.
Table-5.8 provides the detail share of basmati rice exports in total rice
exports 2004-05 to 2009-10. The share of basmati rice exports have increased in
terms of quantity and value during the period from 2004-05 to 2009-10 except in
two years 2006-07 and 2007-08. However, the unit value of exports of basmati
rice has gone up from 2004-05 to 2007-08 but declined in the last two years i.e.,
during 2008-09 and 2009-10. The unit value of exports of rice has gone up
continuously during 2004-05 to 2009-10. However, quantity and value of rice
exports from India have fluctuated several times and have reached the lowest level
in the year 2009-10.
Table-5.8 Percentage share of Basmati rice exports in the total rice exports of India during 2004-05 to 2009-10 (Quantity: ‘000 Tonne; Value: Rs. in Crore; Unit Value: Rs. Per Kg.)
Year Basmati Rice Total Rice
Quantity Value Unit Value Quantity Value Unit Value
2004-05 23.98 41.43 172.78 4796.66 6696.43 13.96
2005-06 28.54 48.91 171.42 4088.06 6221.27 15.22
2006-07 22.02 39.69 180.16 4747.91 7034.65 14.82
2007-08 18.29 36.96 202.04 6469.25 11754.38 18.17
2008-09 62.55 84.89 135.70 2488.29 11164.4 44.87
2009-10 91.24 97.26 106.61 940.41 5121.52 54.46
Co-efficient of Variation (CV)
2004-05 to 2009-10 19.74 56.25 42.96 49.59 34.55 66.63 Source: www.calculated agricoop.com, GOI
Table-5.9 provides the details percentage share of imports of basmati rice
in total rice import in India. Quantity of imports of Basmati rice in total rice
imports declined steeply from 0.015 in 2005-06 to 0.002 in 2006-07. Thereafter
the share has remained low at 0.004 in 2008-09 and 2009-10. Value has remained
stable during 2005-06 to 2009-10 except in 2006-07. However unit value has
fluctuated during the period from 2005-06 to 2009-10. The total rice import
during the above period has fluctuated in terms of quantity value and unit value.
152
Table-5.9 Percentage share of Basmati Rice imports in the total rice imports of India during 2005-06 to 2009-10 (Quantity: ‘000 Tonne; Value: Rs. in Crore;
Unit Value: Rs. Per Kg.)
Year Basmati Rice Total Rice
Qty. Value Unit Value Qty. Value Unit Value
2005-06 0.015 0.01 89.90 1719.71 2502.43 14.55
2006-07 0.002 0.00 218.69 8052.17 9440.48 11.72
2007-08 0.003 0.01 167.28 4629.09 8035.49 17.36
2008-09 0.004 0.01 250.60 2389.48 6020.56 25.2
2009-10 0.004 0.01 199.19 515.45 1647.44 31.96
Co-efficient of Variation (CV)
2005-06 to 2009-10 65.48 38.55 59.46 85.83 61.36 41.15
Source: www.calculated agricoop.com, GOI.
Table-5.10 provides the details share of exports in production of rice in India.
The data for the two decades of production and exports of rice has clearly indicated
an almost continuous decline in the percentage of exports to production of rice from
1990-91 to 2009-10. The share of exports of rice declined from 8.34 per cent in
1990-91 to 2.81 per cent in 2000-01. A further decline to 1.57 per cent was in 2007-
08 with a trend of rise during the next two years in 2008-09 and 2009-10. Severe
competition from major rice producing countries in Asia and other countries in the
major importing countries and continuous rise in domestic consumption of rice in the
country have contributed to this trend.
153
Table-5.10 Percentage Share of rice exports in the total Production of rice in India
Year Production Export % Share of Production
In Export in India
1990-91 42.12 504.99 8.34
1991-92 44.35 678.24 6.54
1992-93 40.6 580.4 7.00
1993-94 43.58 767.67 5.68
1994-95 42.72 890.57 4.80
1995-96 42.67 4914.01 0.87
1996-97 40.98 2511.98 1.63
1997-98 42.74 2389.86 1.79
1998-99 42.28 4963.59 0.85
1999-00 42.75 1896.12 2.25
2000-01 43.18 1534.48 2.81
2001-02 43.85 2210.98 1.98
2002-03 41.09 5057.43 0.81
2003-04 41.53 3412.05 1.22
2004-05 41.91 4796.66 0.87
2005-06 44 4088.06 1.08
2006-07 42.96 3379.46 1.27
2007-08 41.9 2670.86 1.57
2008-09 42.3 1962.26 2.16
2009-10 40.86 1253.66 3.26 1990-91 to 1999-00
CV 2.59 85.29 ---
2001-02 to 2009-10 CV
2.60 43.84 ---
Source: www.calculated agricoop.com, GOI. 5.4. IMPACT OF WHOLESALE PRICES ON RICE IN INDIA
Table-5.11 Major Centre –wise Wholesale Prices of Rice in India during Sept-2009 to Sept-2011 (In Rs. /Qntal)