Wanderlust…

The International Reporting (and Life) Adventures of Vivian Salama

Export Ban Frustrates Farmers

Posted by vmsalama on September 15, 2008

Vivian Salama

The National | September 15. 2008 8:13PM UAE

MUMBAI // Rice farmers are growing increasingly frustrated as their planting season nears and India’s export ban on the grain continues. With planting just two weeks away, farmers fear they will suffer financially as countries, including the UAE, turn to other markets to satisfy demand. 

India’s non-basmati rice – the most affordable and popular variety of this staple grain – has not left its borders since April. The government in New Delhi said the ban was to safeguard domestic supplies for the world’s second-largest population.

However, the embargo has many critics abroad – heavily rice-reliant countries in the Gulf – and in India. This month, the country’s food ministry estimated positive yields of 6.24 million tonnes for the coming rice season, well above the target of 5.2 million tonnes. The government has already opted to lift the ban on corn exports, saying it expected to harvest a bigger crop this year.
“We have to protect the interest of farmers,” India’s agriculture minister, Sharad Pawar, told Reuters.

The Indian government had originally imposed the ban on non- basmati rice last October, but lifted it following protests from exporters. It later re-implemented the ban and added a duty of US$200 (Dh735) per tonne for the export of basmati rice. 

Now, talks to reverse the ban on certain types of rice have stalled, despite positive forecasted yields. Farmers are angered by the ban, saying it is detrimental to India’s agricultural sector.

“Farmers don’t want bans on rice or wheat,” said Balbir Singh Rajewal, a paddy farmer and president of the Bhartiya Kisan Union of Punjab. “When exports are banned, farmers lose money.”

The decision by countries such as India, Egypt and Brazil to limit exports on rice as a way to curb skyrocketing prices and feared domestic shortages has been criticised by Gulf-based retailers whose businesses rely heavily on sales of the grain.

The price of the benchmark 100 per cent B grade white rice was up last week to $735 per tonne, although it has slipped with falling oil prices from its record high of $1,080 per tonne in April.

The UAE imports more than 75,000 tonnes of rice annually from countries including India, Pakistan, Thailand, Vietnam and the Philippines. More than 3.5 million Indians live in GCC countries, with 1.4 million in the UAE alone, making this a hot-button issue in the region.

However, those representing India’s agricultural sector insist that the stakes are even higher domestically. Agriculture is a major component of the economy, from which more than 66 per cent of Indians earn their living. 

While India currently holds a 53 per cent share in the global basmati rice market, many industry insiders are concerned that countries such as those in the GCC, which once relied heavily on India for their rice supplies, will turn to other sources such as Pakistan and Thailand to satisfy demand.

“A lot of that rice is coming into the Middle East right now, but what is happening is that non-basmati has been replaced from countries like Thailand, where prices are starting to get lower week by week,” explained Sunil Bhanji, the Middle East general manager for Tilda, which has its farms in the Indian state of Haryana.

Burhan Turkmani, the general manager of Al Rabiah Trading, based in Dubai, said: “We used to get our non-basmati rice from India but ever since the ban, we have been importing non-basmati from any other countries, like Thailand. For other types of rice, we try not to rely on India now because their prices have soared since the ban.”

Today, the food chain that takes the most basic items from the ground, and via a series of wholesalers and middlemen eventually into a retail shop and into consumers’ hands, has come under strain, with soaring oil and food prices gripping the world. Retailers in the UAE, who have been forced to cap their prices in recent months, say importers should pay the price. But importers say they are at the mercy of exporters.

“In terms of who calls the shots or holds more clout with regard to the distribution chain, it would be the middleman, often private exporters or marketing boards who take from the farmer and then set export prices,” explained Abah Ofon, a soft commodities analyst for Standard Chartered Bank.

Governments in the GCC have recently made it their priority to build up strategic food reserves to protect against export bans and high prices, while eliminating the added costs brought on by middlemen. The Government of Abu Dhabi has already finalised a scheme to purchase farmland in Northern Sudan, and is currently in talks with the governments of Pakistan, Egypt and Kazakhstan. 

Indian farmers insist that rather than curbing exports, their country’s agricultural sector would benefit far more from similar investments by the GCC countries. 

“This would bring many good things to India,” Mr Setia said. “India now encourages foreign investment and farmland investments would be a welcome step.”

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