New Delhi/Mactan, Philippines, Oct 28 - India has scrapped its rice import duty after severe weather hit output, raising the prospect that the world's second-biggest rice consumer could flip over to become a net importer.
Any purchases by India could lift Thai rice prices , seen as the benchmark for the market, from the current $520 a tonne, but are unlikely to take them anywhere close to the record high of $1,080 per tonne seen at the height of a panic over food security in April 2008.
But Indian domestic prices were too low and imports would be possible only with government subsidy, traders added. India, the world's second-largest producer and consumer of rice after China, has never imported a significant amount of rice in the past.
Government sources said the 70 percent import tax had been scrapped until September next year, the end of the 2009/10 marketing year, as the worst monsoon in 37 years hit sowing and subsequent floods damaged the crop in some regions.
The U.S. Department of Agriculture on Monday forecast a 15 million to 17 million tonne decline in India's rice output for marketing year 2009/10 from a record 2008/09 production of 99.2 million tonnes.
India is likely to consume about 90 million tonnes in 2009/10, leaving a gap of about 8 million tonnes, but part of the deficit would be bridged from surplus stocks after bumper harvests in the last two years.
RICE STOCKS
Government sources said India held 14.5 million tonnes of rice stocks on Oct. 1, against a target, called a "buffer stock norm", of 5.2 million tonnes, leaving a surplus of 9 million tonnes.
Traders and industry officials say India is still likely to import rice to maintain healthy stocks.
"The rumour in the market is that India probably will have to buy a considerable amount of rice, and 3 million tonnes is what I hear," Dwight Roberts, president of the U.S. Rice Producers' Association, said late Tuesday ahead of the start of a two-day rice conference in Cebu.
D.P. Singh, president of the All India Grain Exporters' Association, said the country could buy up to 2 million tonnes of rice next year.
"At the moment nothing will be imported. If imports do take place that would happen after December and January, when the size of the summer-sown rice harvest would be known," he said.
By contrast, Philippines purchases of 2.3 million tonnes of rice in 2008 drove prices of the grain to record highs.
A Bangkok-based rice trader said India's domestic rice price was unlikely to rise to international levels soon as there was enough grain in the local market.
"There is no parity, in the international market rice prices are much higher and Indian prices are too low. It is almost double - Thai is around $500 (a tonne) and Indian rice is somewhere close to $275-$280," the trader said.
LOCAL PRICES
A Singapore-based trading manager with an international trading company said the Indian government might have scrapped the import duty on the reasoning that stocks were not enough.
"But that is not the case, there is no scarcity of rice in India and prices are down," he said.
"Imports are not possible unless India subsidises imports, which is not likely to happen soon as there are ample stocks with the government and the domestic market is well supplied," he said.
India banned exports of non-basmati rice last year as the government struggled to control soaring inflation ahead of general elections, part of a series of export curbs and big purchases that helped push benchmark Thai rice to a record $1,080 a tonne in April last year. Prices have since more than halved amid thin demand for most of 2009.
Rice prices in India have already surged 25 percent in the past four months, according to local media reports.