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India to relax limits on rice exports

Posted by vmsalama on April 25, 2008

Vivian Salama in Dubai and Surya Bhattacharya in Abu Dhabi

April 24. 2008 8:36PM GMT


DUBAI // India will ease its restrictions on rice exports to the UAE, as fears of inflation-driven food shortages spread, according Kamal Nath, India’s Minister of Commerce and Industry. 

During a visit to Dubai this week Mr Nath said that a surplus in this season’s rice and wheat production has reduced the likelihood of lengthy export bans.

“We’ve had record crops,” he said yesterday. “We had 227.2 million tonnes in output of rice, wheat and spices, showing a positive trend.”

Government officials estimate that India will export some 5.5 million tonnes of rice in the next year, up from 3.8 million tonnes last year.

The government had originally imposed the ban last October but lifted it following protests from exporters.

Last month’s decision by Delhi to halt exports of non-basmati rice as a way of curbing skyrocketing domestic prices and reducing the danger of local shortages has received much critisism from UAE retailers, whose businesses rely heavily on sales of the grain.

More than 3.5 million Indian nationals live in the Gulf Co-operation Council (GCC) countries, with 1.4 million in the UAE alone, a population the minister said his government is very sensitive to.

“We are conscious that there is a large Indian population and they need to have rice of Indian origin, so we are looking to find a way out,” Mr Nath said.

The UAE imports 80,000 tonnes of rice annually from countries including India, Pakistan, Thailand, Vietnam and the Philippines. While it is not one of the world’s largest importers of the grain, the significant size of the low-income population that consumes rice makes it a critical issue, according to economists.

“Given their salaries, they are most affected, because they spend a large portion of their income on food,” said Abah Ofon, a commodity analyst with Standard Chartered Bank.

Global rice prices jumped from US$650 (Dh2387) to $1,000 per tonne in the first three months of this year alone, hitting a 25-year high. India’s export prices for basmati rice have also gone up from $1,100 to $1,200 in an effort to reduce external demand.

This week, as members of Dubai’s Indian community gathered to welcome Mr Nath, Yusuf Ali, the chief executive of Emke group, which owns the Lulu supermarket chain, appealed publicly to the minister, saying that the removal of rice bans is an issue of great urgency.

“I am forced to make a request on behalf of the UAE,” said Mr Ali. “If this continues, it could become a severe problem in two to three months.”

Several UAE supermarket groups have sought to ease the burden of inflation by implementing price caps on various basic commodities. Last week Carrefour, the region’s largest retailer, signed a memorandum of understanding (MoU) with the Economy Ministry freezing prices on 52 items. Earlier pacts were also signed with the Union Co-operative Society and Lulu Supermarkets, placing ceilings on essentials such as cooking oil, flour, sugar, milk and eggs.

However, Mr Nath criticized the use of price caps as a tool for easing the impact of inflation, saying that it fails to address the underlying cause of the problem. 

“You can’t have price caps at the retail level, you can only have it at the supplier level,” he said, adding that he believes the inflation level has peaked. 

The problem high prices is not limited to this region, with the UN World Food Programme (WFP) describing soaring food prices as a “silent tsunami.” Yesterday, For the first time US rice prices surpassed the $25 mark per 100 pounds on the Chicago exchange yesterday and Wal-Mart, the world’s largest retailer, has restricted the purchases of certain types of rice at its Sam’s Club warehouse stores.

“I am concerned,” said Khaled Zanul Abid, the general manager of Talal Supermarkets in Jebel Ali. “I’m from India – if I can’t get the rice that I eat then it will be a big problem for me and the same for my Indian customers.”

While fears of rice shortages are of major concern to both consumers and food retailers, local advocacy groups warn that a fixation on one commodity could cause the prices of other products to spiral.

“This is not just limited to rice,” said Mohammed Mohammed, the head of membership for the Emirates Society of Consumer Protection, a subsidiary of the Economy Ministry. “It is so important that the country doesn’t focus only on this issue because, when you close the door on alternatives, you risk creating problems that are far bigger than any country’s abilities [to solve].”




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