New Indian duties leave a million tonnes of rice trapped in ports in threat to global food security

Mon 12 Sept 2022
Posted by: Phillip Adnett
Trade News

Rice - India export ban on different types

One million tonnes of rice have been trapped at Indian ports after the Indian government introduced a 20% export duty last week, threatening global food supply chains.

The duty is levied on various types of rice exports and was brought in to alleviate rising rice costs in India caused by lower agricultural yields.

Supply issues

Business Today reports that exporters have stopped loading vessels over concerns that their end customers may not pay the duty.

The trade restrictions may create supply concerns, given India’s dominance in rice supply, according to Bloomberg Intelligence analyst Alvin Tai, who said it “won’t help global food inflation but [it] depends [on] how long they keep it up”. 

Leading exporter

India is the leading rice exporter in the world, accounting for 40% of the trade of the grain, worth $8.8 billion in 2020-21, reports the FT.

Rice is a staple food for about half of the world’s population, with Asia producing and consuming about 90% of global supply.

The Modi administration also imposed restrictions on exports of wheat and sugar this year, but held off on rice as prices have not risen as quickly as some other foods.

Price rise

BV Krishna Rao, president of the All India Rice Exporters Association, told Reuters that export prices of white rice may exceed $400 a ton, rising from the current prices of around $350.

Indian exports could fall by at least 25% in the coming months because of the duty, Himanshu Agarwal, executive director at Satyam Balajee, India’s biggest rice exporter, told CNBC.

According to the Wall Street Journal, the move could cause further price inflation and threaten food supply chains, as global buyers have shifted to India to shore up food supplies after Russia’s invasion of Ukraine.

Ukraine grain deal

Ukraine is usually one of the world’s biggest providers of grain, but exports from the country were blocked by Russia’s invasion until a deal was brokered by Turkey and the UN in July to allow them to resume. 

Politico reports that France and Romania have agreed a deal to increase grain exports by solving some of the bottlenecks of the EU’s ‘solidarity lanes’ with Ukraine.

France’s transport minister Clément Beaune said the deal with Romania will cover exports “by river, sea and land”.