Are wheat and rice export almost nationalised?

Is India’s exports of wheat and rice are now nationalised? Will the sugar exports also be canalised through NCEL?

On November 30, 2023, the Director General of Foreign Trade notified the quantities of export of rice allowed to Mali, Senegal, Gambia and Indonesia. In the same notification, the quantity of wheat and wheat products permitted for export to Bhutan was also notified. More importantly, the notification states that this export will be permitted through the National Cooperatives Exports Limited (NCEL). Does it mean that India’s exports of wheat and rice are now nationalised? Will the sugar exports also be canalised through NCEL?

NCEL is registered under the Multi-State Cooperative Society Act, 2002. Its promoters include Gujarat Cooperative Milk Marketing Federation (GCMMF) which owns Amul, India’s most popular milk brand, National Agricultural Cooperative Marketing Federation of India Limited (NAFED) and Indian Farmers Fertiliser Cooperative Limited (IFFCO) and Krishak Bharati Cooperative Limited (KRIBHCO). The National Co-operative Development Corporation (NCDC), a statutory corporation, is also one of the promoters.

Export Bans

It should be recalled that wheat export was banned on May 13, 2022. On September 8, 2022, the export of broken rice was also banned by the government and a 20 percent export duty was imposed on shipments of raw white (non-parboiled) non-basmati rice. The export of basmati rice and parboiled non-basmati rice was however exempted from export duty. On July 20, 2023, the export of non-basmati white rice was also banned but export of par-boiled rice was permitted. On August 25, 2023, a 20 percent duty was imposed on the export of parboiled non-basmati rice. This was to remain effective till October 15, 2023. However, on October 13, 2023, the export duty was extended to March 31, 2024.

On August 25, 2023, a minimum export price (MEP) of $1,200 per tonne was fixed for basmati rice and export below this price was not allowed. The exporters demanded that the MEP needs to be lowered if Indian exports must remain competitive. Rejecting the exporters’ demand to reduce it to around $900, the government decided on October 14, 2023 to retain the MEP of basmati rice at $1,200/tonne till further order. It seems that the food minister had earlier agreed to reduce the MEP to enable farmers to get a fair price for basmati paddy. On October 26, the government lowered the MEP for basmati rice to $950/tonne from $1,200/tonne.

Diplomatic Considerations

While these restrictions on the export of rice continue, the government is permitting certain quantities to be exported on diplomatic considerations. These relaxations from export restrictions are decided by the ministry of external affairs in consultation with the ministry of food and public distribution. So, every case of export of non-basmati rice is now decided by the ministries of the Union government. This gives enormous leeway to India because importing nations must submit formal requests through diplomatic channels.

So far, on diplomatic considerations, the export of rice has been allowed to nearly a dozen countries including those in the neighbourhood. In the past, the export of wheat and rice was allowed on diplomatic considerations, but these were done by the public sector enterprises (PSEs) of the ministry of commerce.

For example, in 2012 and 2013, the government allowed the export of 45 lakh tonnes of wheat from central pool stocks held by the Food Corporation of India.  The public sector undertakings of the ministry of commerce such as State Trading Corporation (STC), Minerals and Metals Trading Corporation (MMTC) and Projects Equipment Corporation (PEC) exported 42.40 lakh tonnes. During 2013 and 2014, the government again allowed the export of 20 lakh tonnes of wheat, out of which 15.57 lakh tonnes were exported.

The export of non-basmati rice allowed on diplomatic considerations will henceforth be undertaken by the NCEL, a newly created organisation that does not have any experience in dealing with the complexities of export and import procedures.

Better Deal for Farmers?

Media reports suggest that the export of rice by NCEL, rather than by PSUs of the ministry of commerce or private traders, will ensure that farmers also benefit from the exports. It seems that 50 percent of the export profit over and above the minimum support price will be shared.

It is unlikely that the government will allocate any quantity of export of non-basmati rice from the central pool stocks held by FCI and state agencies. The production of rice in Kharif 2023 is projected to be 3.8 percent lower than last year, and as India moves into the election cycle, it may well be quite conservative with central pool stocks. It means that NCEL or private trade engaged by NCEL will purchase non-basmati rice from the open market. In this situation, it may not be possible to be certain that traders have paid farmers the MSP of paddy.

Going forward, if the government continues to decide the quantity of wheat, rice or sugar to be exported to various countries, it may enable NCEL to become a professionally managed organisation with personnel experienced in export and import trade. This will mean a diminished role for existing PSUs of the ministry of commerce. Since the Parliament elections are due in April 2024, it is unlikely that the ban on export of wheat and non-basmati raw rice will be lifted before October 2024. Early reports suggest that the El Nino effect may continue in the next Kharif season. In that event, private trade of rice export of par-boiled rice is likely to remain low. Whenever such exports are opened to private trade, the real benefit of NCEL’s presence will be tested as it will have to compete with private trade.

Siraj Hussain is a former Union Agriculture Secretary. Views are personal, and do not represent the stand of this publication.