Government Mulls Extending Parboiled Rice Tax In Risk To World Supply

(Bloomberg) -- India, the world’s top rice shipper, may extend an export tax on the parboiled variety as part of efforts to ease food inflation ahead of national elections, a move that could keep world supply tight and send prices to new peaks.

The government of Prime Minister Narendra Modi, who will seek a third term in the polls due in the first half of this year, is considering keeping the export levy at 20%, according to people familiar with the matter. There is no immediate proposal to ban exports of parboiled rice, said the people, who asked not to be identified as the talks are confidential. The tax is currently due to expire March 31.

Any such move could add to the rally in benchmark Asian rice prices, which are hovering near a 15-year high after India began restricting sales of key varieties in 2023. That would be bad news for some countries in West Africa and the Middle East that rely on the South Asian nation for most of their requirements of the food staple.

A spokesperson representing both the food and commerce ministries didn’t immediately comment.

An extension of the levy would be a part of the government’s aggressive measures to control food inflation that climbed to almost 10% in December from a year earlier. India has already curbed exports of wheat, sugar and most rice varieties, and cracked down on hoarding. It has also extended low edible oil import duties for another year.

Still, retail prices of rice in Delhi remain about 11% higher than a year ago. Food Minister Piyush Goyal launched a program Tuesday to provide subsidized rice to retail customers across the country. The government is already selling wheat flour and chickpeas at cheaper-than-market rates.

“Any such move will keep domestic prices under check and help the government earn some extra revenue,” said B.V. Krishna Rao, president of the Rice Exporters Association. 

India’s total rice exports slumped 29% from a year earlier to 12.3 million tons between April 1 and Jan. 21, according to government data. Shipments of parboiled rice fell 6.5% to 5.8 million tons during the period.

Parboiled rice, which accounted for about 30% of India’s total exports before the curbs, is the result of a process that involves partial boiling of paddy before milling to boost its nutritional values and change the texture of cooked rice. The South Asian nation had a share of about 40% in the global rice trade in 2022-23.

(Updates to add industry comment in seventh paragraph.)

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