New Delhi/Karachi, Sept 18 - India's basmati rice exports are expected to fall sharply as an export tax makes the grain more costly while its rival, Pakistan, gains from a steep fall in its currency, a top exporter said on Wednesday.
R.S. Seshadri, director of Tilda Riceland, India's largest basmati rice exporter, said the price gap between premium varieties from the two countries had risen to about $500 a tonne. "With a gap of $500 a tonne, there is no question (chance) that a foreign buyer will look at India. This gap has been existing for the last two months," he told Reuters.
In neighbouring Pakistan, where rice accounts for about 8 percent of the country's exports, traders said shipments were rising.
"Rice exports have become attractive due to the rupee's devaluation, and we have seen exports going up," said Abdul Baseer, vice chairman of the Rice Exporters' Association of Pakistan.
Pakistan's total rice output is expected to rise at least 10 percent to more than 6 million tonnes in the 2008/09 fiscal year on a larger planted area, officials and growers say.
But exporters estimate rice output at 7 million tonnes and say exports could exceed 4 million tonnes.
A Pakistani exporter, who did not want to be named, said annual basmati exports from the country might rise to 1.2 million tonnes next year from 800,000 tonnes.
"Pakistan's minimum export price is lower on basmati rice than India's and along with the devaluation exports are going to be more attractive," he said.
EXPORT CURBS
Seshadri said new export contracts were usually signed in October, just ahead of the harvest of the new crop.
India's basmati rice is quoted at about $1,400 a tonne for varieties usually shipped to the Middle East. The government slapped a tax of about $200 per tonne on overseas sales of its aromatic basmati variety of rice earlier this year.
It also allowed exports of the premium grades only at a floor price of $1,200 per tonne.
"The $200 tax is just the last straw and it is not at all helping. Neither does it go to the farmer nor to the trader," Seshadri said. "A clarification on this is needed as quickly as possible. The new rice crop is going to come in a month or two."
He added the government would be under pressure to roll back the export tax by October or November if Indian exporters lost market share, but by then farmers would have already sold the crop at a lower price.
India banned exports of non-basmati rice earlier this year to ensure domestic supplies, but this month allowed shipments of the premium non-basmati variety, Pusa-1121.
It exported 5.5 million tonnes of rice in the year to March 31, 2008, up from 3.8 million tonnes the year before, but the new restrictions have tempered sales.
Of the 5.5 million tonnes, estimates suggest 4 million tonnes were of non-basmati rice, while superior quality rice including basmati accounted for 1.5 million tonnes, trade officials say.
"Why do you need an export duty for controlling inflation?" questioned Gurnam Arora, joint managing director of Kohinoor Foods. "Basmati consumption is not going to help in fighting inflation, so why have they taxed it?"
He said India's adequate rice stocks should encourage the government to withdraw the export tax.
Pakistan, the world's fifth-largest rice exporter, exported 3.33 million tonnes of rice, including 1.28 million tonnes of basmati, in 2007/08.
Karan Chanana, managing director of Amira Foods India Ltd, said the price disadvantage had been offset to a small extent by a fall in the value of the Indian rupee against the dollar over the past week, but the Pakistani currency's plunge had been much sharper.
The Pakistani rupee has lost more than 20 percent against the dollar this year due to a deteriorating balance-of-payments position. It traded at a record low of 77.55 rupees per dollar in early trade on Wednesday.