India to cut floor price for basmati exports to stay competitive

India, the world’s biggest rice exporter, is considering to cut the floor price for basmati shipments to make the premium variety attractive in the world market, according to people familiar with the matter.

The nation, which has curbed overseas sales of all grades of rice to control domestic food inflation, will reduce the minimum export price to $850 a ton from $1,200, said the people who asked not to be identified as the discussions are confidential. A decision on the issue will be taken soon, they said.

The government is looking at the proposal following pleas from the industry, which says that current price levels are making Indian shipments costlier than those from countries such as Pakistan, the people said. Basmati rice accounted for about 20% of India’s shipments in 2021-22.

A spokesperson, who represents both food and commerce ministries, declined to comment on the proposal.

The likely move may help Indian traders compete in the world market and bring down global prices of the variety, which is generally grown in the Indian subcontinent and commands a healthy premium because of its longer grain size and unique aroma. The possible measure is not expected to have an upward pressure on local rice prices as India traditionally exports most of its basmati. 

The South Asian nation set the floor price in August to prevent some traders from smuggling non-basmati white rice, which has been banned for exports, by declaring them as the more expensive basmati. The benchmark Asian rice price jumped to the highest in about 15 years early last month on global supply concerns, before trimming gains on an improved Thai crop outlook.

Even after India’s possible move on basmati exports, curbs on shipments of wheat, rice and sugar could stay for a longer period, traders say. The government may relax some norms after the harvesting of monsoon-sown crops in October and November, but several restrictions could continue until early 2024 when national elections must be held. Prime Minister Narendra Modi will face voters of a third five-year term.