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India Rice Export Ban Traps 1M Tons In Ports

FILE PHOTO: A worker packs a sack filled with rice on the outskirts of the western Indian city of Ahmedabad February 27, 2015. Picture taken February 27, 2015. REUTERS/Amit Dave

Rice loading has stopped at Indian ports and nearly one million tonnes of grain are trapped there as buyers refuse to pay the government’s new 20% export levy on top of the agreed contract price, five exporters told Reuters on Friday.

India banned exports of broken rice and imposed a 20% duty on exports of various other types on Thursday as the world’s biggest exporter of the grain tries to boost local supplies and calm prices after below-average monsoon rainfall curtailed planting. Read full story

“The duty became effective from midnight, but buyers are not ready to pay the duty,” said B.V. Krishna Rao, president of the All India Rice Exporters Association (AIREA). “We have stopped loading vessels.”

India ships around two million tonnes of rice every month, with large amounts loaded from eastern ports such as Kakinada and Visakhapatnam in Andhra Pradesh state.

In similar circumstances, New Delhi has in the past provided exemptions for contracts backed by letters of credit (LCs), or payment guarantees, issued until the day the government made a policy change, said Himanshu Agarwal, executive director at Satyam Balajee, India’s biggest rice exporter.

But that has not happened this time.

“Margins are wafer-thin in rice business and exporters can’t afford to pay 20% duty. The government should allow exports against already issued LCs,” Agarwal said.

New Delhi allowed exports against already-issued LCs when it banned wheat exports earlier this year. Read full story

Around 750,000 tonnes of white rice are lying at ports, which attracts 20% duty from Friday, traders estimate.

As for the broken rice ban, India has allowed the loading of consignments that have been handed over to customs or where the ship anchored before Thursday’s notification. But loading needs to be completed before Sept. 15.

At least 350,000 tonnes of broken rice lying at various ports do not meet these criteria, and moving cargoes back to the hinterland is not possible, said a New-Delhi based dealer with a global trading firm.

Stuck broken rice shipments were heading to China, Senegal, Senegal and Djibouti, while other grades of white rice were bought by buyers in Benin, Sri Lanka, Turkey and the United Arab Emirates, exporters said.

The AIREA has asked the government to relax the new rules for transitional cargoes totalling 750,000 tonnes of white rice and 500,000 tonnes of broken rice.

The commerce ministry did not immediately respond to a request for comment.

India exports rice to more than 150 countries and any reduction in shipments would increase upward pressure on food prices, which are already rising because of drought, heatwaves and Russia’s invasion of Ukraine.