According to the President of the Indian Rice Exporter Association, India’s tax on rice exports will help rice suppliers in other major food-growing countries such as Thailand, Vietnam, and Pakistan, to benefit…

Labors are packing rice at a wholesale market in New Delhi, India (Photo: Bloomberg)

According to Reuters, India, the world’s largest rice exporter, has decided to impose taxes on some rice exports to ensure domestic supply due to declining production. This move is forecast to have an impact on global food markets and make food inflation more serious.

According to the announcement of the Indian Ministry of Finance on September 8, the country’s export of shelled rice will be subject to a 20% tax. Partial or full unshelled rice, except for parboiled rice. Basmati rice is also subject to the same level of export tax. New Delhi bans the export of broken rice 100%, which some poor African countries import for food, even though this type of rice is mainly for animal feed. The new regulation became effective on 9 September.

The move can lead importers to limit Indian rice purchases and move to rival countries such as Thailand and Vietnam.

“Rice varieties subject to tax account for about 60% of non-basmati rice (which is not the commonly grown Basmati variety in India) exported by India,” Mr. B.V. Krishna Rao, President of the Indian Rice Exporters Association, said. “With the new tax, India’s rice exports will be less competitive in international markets and customers will move to countries such as Thailand and Vietnam.”

According to Mr. Rao, the Indian Government’s above move will also drive global rice prices up. The export price of white rice can exceed 400 USD/tonne, from the current 350 USD.

India currently accounts for more than 40% of global rice exports and competes with Thailand, Vietnam, Pakistan, and Myanmar in international markets.

Rice cultivation in Gharaunda, northern Haryana State, India (Photo: Reuters)

 According to the forecast of Mr. Himanshu Agarwal, Director of Satyam Balajee – India’s largest rice exporting company, India’s rice exports will fall by at least 25% in the coming months.

Indian exporters expect the Government not to impose new taxes on contracted and pending orders.

“The buyer cannot pay an additional 20% on the agreed price. Even the seller can’t afford this tax. The government should free taxes on signed contracts, ” Mr. Agarwal suggested.

In 2021, India exported a record 21.5 million tonnes of rice, more than the total of the world’s four largest rice exporters combination, including Thailand, Vietnam, Pakistan, and the United States.

Mr. Agarwal forecasts that the ban on rice exports will greatly affect China’s orders – India’s largest importer of rice with 1.1 million tonnes in 2021.

Rice has become India’s third major agricultural product to be subject to export restrictions this year. New Delhi had previously restricted wheat and sugar exports, turning global markets upside down as this country followed food protection. Prices of major food commodities in the world have up to a record, before falling in recent times thanks to the prospect of a positive global crop.

The move by the Government of India is set against the country’s current rice-growing area which has fallen 5.6% due to the lack of rain in some localities. Rainfall has been down by more than 25% on average in some of the country’s major rice-growing states, such as Uttar Pradesh, Jharkhand, and Bihar. Meanwhile, every year, rainfall in this period is usually 5% higher than usual.