Explained: Why has govt lifted the export ban on broken rice

By: Yash Gupte

India had imposed a ban on export of broken rice on September 9, 2022 as measure to increase the domestic availability of the commodity.

The central government on Tuesday, November 29, 2022 lifted the ban on the export of organic non-basmati rice and broken rice. The decision of lifting the ban was announced in a notification released by the Directorate General of Foreign Trade (DGFT), Ministry of Commerce on November 29, 2022. The body said the export of organic non-basmati rice, including organic non-basmati broken rice, will now be governed by rules that prevailed before the September ban. India had imposed a ban on export of broken rice on September 9, 2022 as measure to increase the domestic availability of the commodity. According to the commerce ministry, rice worth $5.5 billion was exported during April-September this fiscal. There was a year-on-year drop in the export of the commodity as rice worth $9.7 billion was exported during the same period in 2021-22.

The government had imposed a ban on the export of broken rice and non-basmati rice in order to regulate the soaring prices and increase the availability of the commodity for domestic consumption. Due to higher international prices, the domestic price of broken rice which was Rs 16/kg had gone up to Rs 22/kg. The poultry industry and animal husbandry producers were the hardest hit by the price increase of feed ingredients, as broken rice accounts for 60-65% of the cost of chicken feed, and any increase in price would result into increase in the prices of poultry products such as milk, eggs, and meat.

One of the major reasons behind the government’s decision of lifting the ban could be the drop in domestic inflation in the month of October. The Consumer Price Index (CPI) which is used to measure the inflation rate was at 6.77 percent in October. The CPI had peaked to 7.41 percent in September. The food price inflation also dropped from 8.60 percent in September to 7.01 percent in October. Therefore, with the fall in domestic inflation and enough stock of rice in the market, the government might have taken the decision of lifting the ban on export of the commodity. Ashok K.K. Meena, MD, Food Corporation of India (FCI) on November 23 had said that ‘there is a negligible hike in the retail price of rice and the prices are under control.’

The chart below shows the export of broken rice from India during last five years.

        *Export of broken rice from April-September 2022

The export of broken rice has been rising continuously over the years. In the FY 2017-18, 1200.355 tons of broken rice was exported from India. The FY 2019-20 witnessed a massive decline in the exports of broken rice due to the outbreak of the covid-19 pandemic which forced the government to impose nationwide lockdowns and which ultimately disrupted the global supply chains. Only 270.338 tons of broken rice was exported in the FY 2019-20. The exports in the FY 2020-21 registered a growth of 663.7 percent as 2064.562 tons of the essential commodity was exported to different countries. The FY 2021-22 witnessed the highest exports of broken rice till date as 3890.866 tons of broken rice was exported.

Farmers are expected to benefit from the central government’s decision of lifting the ban on export of broken rice. Many rice mill associations had requested the government to lift the ban which was imposed in September 2022. One of them was the South India Rice Millers Association (SIRMA). It had demanded to lift the ban and abolish the 20 percent export duty. SIRMA’s president T Devender Reddy had earlier said that the export ban would result in farmers suffering a loss of about Rs 600 per quintal.

Farmers are expected to benefit due to the government’s decision of lifting the ban on the export of broken rice and organic non-basmati rice. The export of the commodity from India will also ensure a sufficient stock of rice in countries which import rice from India. India accounted for 41 percent of the total rice exports in the world in 2021 larger than the next four exporters (Thailand, Vietnam, Pakistan and United States) combined. China, Senegal, Vietnam, Djibouti and Indonesia are the biggest importers of India’s broken rice. Therefore, if the ban would have been continued for a longer period of time, major rice exporting nations like Thailand, Vietnam and Pakistan would have benifited and captured the market, resulting in a loss for India.