The Government of India has banned the export of sugar after wheat and now preparations are on to ban the export of rice as well. However, the decision on rice will not be taken as fast as was taken in the case of wheat and sugar. The government and rice business experts say that there is still enough stock of rice in the country and the price of paddy is less than the Minimum Support Price (MSP).
India is the largest exporter of rice in the world. Rice is exported from India to more than 150 countries. On May 14, the government had banned the export of wheat. Due to the ongoing war between Russia and Ukraine, the price of wheat has increased significantly at the international level. Due to this the prices of wheat in the country also increased significantly. To control the prices, the government had banned its export. After this, the government also limited the export of sugar. Sugar exports from the country picked up a lot this year, leading to a rise in the price of sugar in the domestic market.
After this, the government decided to limit sugar exports to 100 lakh tonnes. The government says that this decision was taken to stop the rising price of sugar and to continue its smooth supply in the country. This restriction will be applicable from June 1 till further orders. Sugar mills and exporters will have to get export approval (in the form of ex-port release order) from the government for exports after June 1.
rice store
According to the data of the Ministry of Agriculture, there is sufficient stock of rice in the country. There is too much stock. There is no worry about its price hike or availability for export. Therefore, there is no plan to immediately ban the export of rice. A decision will be taken if any situation arises. Rice exports from the country reached 21.20 million tonnes in FY22, up from 17.80 million tonnes in the previous year. Data from the All India Rice Exporters Association shows that despite the increase in exports, the price of rice is declining.
The reason for this is that India has huge reserves of it. The Food Corporation of India (FCI) is increasing procurement. FCI has reserves of 662.2 million tonnes of rice and paddy, against its target of 1358 million tonnes. According to experts, the production of wheat in the world has been affected due to the Ukraine crisis, but the production of rice has not been affected.
condition of sugar
After banning the export of wheat, the government has decided to limit the export of sugar to 100 lakh tonnes. The government says that this decision has been taken to stop the rising price of sugar and to continue its smooth supply in the country. This restriction will be in force from June 1 till further orders. Sugar mills and exporters will have to get approval from the government for exports after June 1.
The way the prices of sugar were increasing in the country, it was being speculated that the government might ban its export sooner or later. Sugar exports have been banned for the first time in six years. The government wants to keep an additional sugar stock of at least two to three months with it to meet the domestic demand. In the current year, agreements have been signed for export of 9 million tonnes of sugar, out of which 82 lakh tonnes have been sent for export from sugar mills. About 78 lakh tonnes of sugar has been exported.
Price and stop effect
At present, the price of sugar in the country is Rs 3150 to 3500 per quintal in the wholesale market. The price in the retail market is 36 to 44 rupees per kg. Due to more exports, the price of sugar in the country started rising. This is the reason why the government decided to ban its exports. However, the government has clarified that this restriction will not apply to sugar being exported to the EU and the US under international agreements (CXL and TRQ).
Indonesia, Afghanistan, Sri Lanka, Bangladesh, United Arab Emirates, Malaysia and African countries buy maximum sugar from India. According to the International Sugar Organization, there are five top sugar exporters in the world. These are Brazil, Thailand, India, Australia and Mexico. In Brazil and Thailand, weather conditions (less rain and hailstorm) resulted in less sugarcane production. Due to this there has been a shortage of 1 million tonnes internationally. Sugar exporters from India tried to capitalize on this shortfall. Secondly, due to the decrease in production, the prices in the international market have also increased. Uttar Pradesh, Maharashtra and Karnataka are the largest sugar producing states in the country. These three states produce 80 percent of the country’s total sugar.
impact on inflation
Retail inflation in the country is above 7 percent. The government is taking many decisions to deal with this. The central government first stopped the export of wheat, as the price of flour was rising in the domestic market. After this the excise duty of petrol and diesel was cut. Similarly, the government has also announced the removal of customs duty and agricultural infrastructure cess on import of 20 million tonnes of crude soybean and sunflower oil annually by March 2024. According to experts, even if the effect is not visible immediately, the effect will be visible in the next six to eight months. However, it is also believed that the retail inflation rate will not be less than 6 percent for the next one year.
According to experts, the contribution of food items to the retail inflation rate is about 45 percent and that of petrol diesel is 15 percent. If you look at both together, their contribution is about 60 percent. In such a situation, retail inflation can be reduced by controlling the prices of food items. This is the reason why the government took decisions in respect of petrol-diesel, soybean, sunflower oil, wheat and sugar.
what the experts say
Apart from India’s food security, the Government of India is committed to ensuring the food security of neighbors and vulnerable countries. The Control Order on the Export of Wheat and Sugar serves three main purposes. It also maintains India’s credibility as a supplier and helping others in distress, along with food security for the country.
BVR Subramaniam, Union Commerce Secretary
The immediate effect of the announcements that have been made will not be visible to the public. It will take at least six-eight months. One, in the case of petrol and diesel, it has to be seen that what is the attitude of the oil companies. Will they increase their profit or will the public benefit from the reduced prices in the international market. Similarly is the case of wheat, sugar or rice. It has to be seen what attitude the stockists adopt.
Subhash Chandra Garg, Former Union Finance Secretary