Covid-19 to affect Indian Basmati rice exports

The Corona virus still spreading rapidly in key export destinations, logistical constraints and business shutdowns are expected to have a negative bearing on the industry.

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With Iran being severely affected by Covid-19, it has added to the already existing woes of the Indian basmati rice industry; and further marred any expectations of taking off in the near term. As per an ICRA research report, with the virus still spreading rapidly in key export destinations, logistical constraints and business shutdowns are expected to have a negative bearing on the industry.
 
Similar constraints will also impact the domestic market. Moreover, the industry whose performance is linked to exports to a large extent is expected to have a weaker H1 FY2021 thereby leading to excess supply in the domestic market and price corrections.
 
Giving more insights on the trend, Sheetal Sharad, Vice President, ICRA, said, "After witnessing strong growth of 25 percent in FY2018 and 22 per cent in FY2019, basmati rice exports moderated in 9M FY2020 owing to weak off-take across key markets like Iran. The value of exports fell from Rs 32,804 crores in FY2019 to Rs 20, 925 crores in 9M FY2020. Exports are estimated to have further moderated in Q4FY2020; and now with the COVID-19 outbreak, the uncertain scenario in basmati rice exports has worsened."
 
Basmati rice imports by Iran, the largest importer (33 percent of total exports) fell significantly in 9MFY2020 (13 percent lower in volumes, 11 percent lower in value terms than the corresponding previous year). As against this, there was an increased preemptive buying in FY2019 due to the uncertainty over its global trade status, post re-imposition of US trade sanctions in November 2018.
 
In the past, whenever sanctions were imposed, Iran utilised its reserves (receivables against crude oil exports to India) through a payment mechanism to import Basmati rice from India. The same mechanism was reintroduced towards the end of 2018. With these reserves rapidly depleting, the uncertainty regarding future trade with Iran continues, subdued buying was witnessed also in Q4 FY 2020. The pandemic has only worsened near-term concerns and prospects.
 
As for exports to the EU, the same dropped sharply by 32 percent in FY2019 to Rs. 1,590 crores, post-implementation of new regulations about chemical residues in Basmati rice. The decline was however arrested at 13 percent with the exports at Rs. 1,011 crores in 9M FY2020 over the corresponding previous. Here again, demand revival could take more time. Nevertheless, the EU's contribution to India’s basmati rice exports remains modest, thus, the blow of the above on the industry is expected to be limited.
 

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Managing Intellectual Property

Managing Intellectual Property

“Managing Intellectual Property” is a series of articles on intellectual property rights in the trade related matters. The series covers various dimensions of IPR, pertainign to the food processing industry, in the form of simplified legal text with suitable cases studies. We hope the series will benefit the food processors, policy makers, executives, managers, researchers, traders and other stakeholders in the processed food industry.Read More

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