Why India restricted export of rice amid global food crisis

NEW DELHI (Agencies): Quantities of federally held rice stocks bought by ethanol-making distilleries rose sharply this year — about 920% — as supplies of broken or damaged grains of the staple dwindled, one of the considerations that led India to curb export, people familiar with the matter said.

On June 5, 2021, Prime Minister Narendra Modi had announced the advancing of the target year for 20% ethanol-blending by five years to 2025, a high-priority national goal. The blending programme aims to lessen India’s dependence on costly oil imports.

Broken or partly damaged rice are remnants from paddy dehusked by mills. It is a key source of poultry feed as well as a raw material from which ethanol is made.

The country will need 11 billion litres of ethanol to meet the target 20% blending target, according to official projections. Since that target cannot be met by molasses alone, which is a by-product of sugar, the country permitted the use of grains for manufacturing ethanol, which is blended with petrol, in 2018-19.

In 2020-21, the government allowed the Food Corporation of India (FCI), the Centre’s main food stockpiler, to sell specific quantities to grain-based ethanol distilleries.

In the so-called ethanol supply year 2021-22, FCI allotted 1.3 million tonne of rice for the purpose. Of this, distilleries lifted 505,935 tonne up till August 28 2022, up from 49,000 tonne in the previous year, the food ministry’s data shows.

As a global food crisis took hold, and wheat became scarce due to the Ukraine war, the export of broken rice soared, pushing up prices. “Countries desperate for food began importing broken rice from India,” said Anshul Singh, the proprietor of Santoshi Impex, a food trading firm.

During April-August 2022, the export of broken rice stood at 2.1 million tonne, up from 1.5 million tonne in the corresponding period of the previous year. When compared to a base period of April-August 2019, this represents a 4178% jump, the data showed.

Importers of broken rice included Djibouti, a country in the Horn of Africa, Indonesia, Senegal and even China, the food ministry’s data show.

“FCI rice was cheaper than broken rice and that is why, this year, FCI rice was bought in larger quantities by distilleries,” said Abinash Verma, the promoter of Eastern Indian Biofuels Private Ltd, a distiller.

FCI rice cost distilleries about ?20 per kg, while broken rice, although unfit for human consumption, was selling at ?21-22. It costs the FCI about ?41 per kg to procure, transport, and store rice.

Higher broken rice prices also pressured poultry breeders, who shifted to other grains such as maize. Maize prices increased from ?19 per kg in January this year to about ?24 per kg in this month.

Verma said India was unlikely to have any real shortage of rice. The government’s curbs on exports, including a 20% export duty, come more as a pre-emptive move as traders began raising prices on anticipation of a lower crop due to a patchy monsoon this year, he said.