India

Rice prices may continue to rise in the country: Food Ministry

On a day after the Agriculture Ministry forecasted 104.99 million tonnes of kharif rice output – a decrease from 111.76 million tonnes last year – the Food Ministry announced on Thursday that domestic rice prices are continuing to rise because of the lower production forecasts and the higher non-basmati exports.

On the same day, the Food Ministry made the announcement, the all-India daily average wholesale and retail prices of rice, wheat, and wheat flour soared 9-20 percent.

According to the Department of Consumer Affairs portal, the average daily retail price of rice in the country rose by 9.03%, wheat by 14.39%, and wheat flour by 17.87% from a year ago. Comparing wholesale prices of rice, wheat, and wheat flour to their prices a year ago (see chart), rice prices were higher by 10.16 percent, wheat prices by 15.43 percent, and wheat flour prices by 20.65 percent.

A first advance estimate of the production of major kharif crops for 2022-23 was released by the Agriculture Ministry on Wednesday that showed kharif rice production during the current season would amount to 104.99 million tonnes due to uneven monsoon, a 6.77 mt – or 6 per cent – decrease compared to last year’s 111.76 mt.

It is estimated that 103.21 million tons of kharif rice will be produced in 2020-21, compared to the 112 million tons set for the current season. Considering the National Food Security Act 2013, which requires rice for distribution, the dip in kharif rice production is significant.

Getting into the domestic rice production scenario for 2022, the Food Ministry reported on Thursday that “there will likely be a 6% shortfall in area and production of paddy.”

It was estimated that 60-70 LMT of production would be lost in domestic production earlier this year. It is now anticipated that production loss of 40-50 LMT will occur this year, and production output will be on par with previous years,” according to the statement.

According to the ministry, “the domestic prices of rice are going up and they may continue to do so since the production forecast is low by about 6 MMT [million metric tonnes] of paddy and exports of non-basmati are up by 11% compared to the same period last year.”

The statement said recent changes to India’s rice-export rules kept domestic prices down without reducing export availability.

Among the reasons for making the changes were to support the ethanol blending programme, which reduces oil import costs, and to help the animal husbandry and poultry sectors by reducing the cost of animal feed, which affects milk, meat, and eggs prices.

The statement explained the need to amend rice export rules, saying “there has been a rise in global demand for broken rice due to geopolitical factors that have impacted commodity prices.”

“Exports of broken rice have risen by more than 43 times in the past 4 years (21.31 LMT exported from April-August, 2022 compared to 0.51 LMT in the same period in 2019) with a significant increase in 2021-22 over last year. The quantity exported in 2021 was 15.8 LMT (April-August, 2021). The price of broken rice increased significantly this year,” the report said.

The statement highlighted the impact of the rising export of broken rice, saying, “Domestic price of broken rice, which was Rs 16/kg in the open market, has increased to about Rs 22/kg in states.” Feed ingredients have been affected the most due to price increases in the poultry and animal husbandry sectors, as more than 60 percent of the input cost for poultry feed is derived from broken rice. Price increases in the feedstock are reflected in the prices of poultry products like milk, eggs, meat, etc., causing food inflation.”

In accordance with DGFT notification, the transitional relaxation for exports of raw broken rice (HS Code 1006-4000) had expired on 15th September 2022, but was now extended to 30th September 2022 and will be further extended to 15th October 2022,” it stated.

It had been banned on September 9 that broken rice be exported.

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