India tightens rice exports in threat to global food prices

India imposed more curbs on shipments of rice to ensure its food security, a move by the top exporter that’s likely to further squeeze global supplies of the grain.

The government levied a 20% export tax on parboiled rice with immediate effect, according to a notification by the finance ministry late Friday, confirming an earlier report by Bloomberg News. India has now restricted overseas sales of all non-basmati varieties, which account for about 80% of its total rice shipments. Its share in the global rice trade is about 40%.

Asian rice prices soared to their highest in almost 15 years earlier this month, and could climb further, raising costs for importers such as the Philippines and some African nations. India’s recent protectionist measures are in line with its aggressive efforts to cool local food prices ahead of a general election early next year, when Prime Minister Narendra Modi will seek a third term.   

“With this move, domestic prices will drop and that will help the government in controlling food inflation,” said B.V. Krishna Rao, president of the Rice Exporters Association. “But, global prices will rise and buyers will have to absorb the increase. There will also be re-negotiations between buyers and sellers on some contracts.”

Rice is a food staple for about half of the world’s population. India’s curbs come at a time when food costs are still elevated because of Russia’s war in Ukraine and as volatile weather across the world threaten supplies of grains and oilseeds. There are concerns India’s move to ensure domestic food security will hit several poorer nations still struggling to recover from the Covid-led economic downturns. 

Parboiled rice accounts for about one-third of India’s total rice shipments. The nation has already banned exports of broken rice and non-basmati white rice, curbed shipments of wheat and sugar, and restricted stockpiling of some crops. India is also considering abolishing a 40% import levy on wheat, and selling tomatoes, onions and grains from state reserves to improve local supplies.

Parboiling is a process that involves partial boiling of the paddy before milling to boost its nutritional values and change the texture of cooked rice. Some restaurants use parboiled rice because it is already clean and easy to cook.

The government said that exporters having valid letters of credit before the new rule will still be allowed to ship the grain. The export tax on parboiled rice will remain in force until Oct. 15, it said.