Basmati rice exports expected to grow steadily during 2019-20

India's exports of basmati rice are expected to witness 4-5 per cent growth during 2019-20, following an increase in average realisations, strong demand from Iran and steady increase in paddy prices since last three years, a report said. The Indian basmati rice industry is likely to touch record high exports of around Rs 30,000 crore in FY19, compared to the previous high of Rs 29,300 crore in FY14, Icra said in a report.

The growth in exports this financial is mainly fuelled by considerable firming up of average realisations, strong demand from Iran and a steady increase in paddy prices for three years in a row. Icra expects the momentum of the current fiscal to percolate into 2019-20, as well with the expectation of 4-5 per cent growth in exports.

"It is important to note that this growth has been despite some challenges that surfaced during FY19 like pesticide residue issue leading to a decline in exports to the European Union (EU), Saudi Arabia mulling the adoption of stringent pesticide rules, payment issues from some Iranian importers and uncertainty due to imposition of trade sanctions on Iran by the US government," Icra assistant vice president, Deepak Jotwani said. The stringent pesticide norms by EU led to the loss of exports worth around Rs 1,000 crore during the nine months of this financial year and the same could exacerbate going forward, he said.

Nevertheless, he said, the fact that the EU contributed around 8 per cent to the exports till FY18, allowed for the loss to be compensated by exports to the Middle Eastern countries. "Further, the industry has been able to tide through most of the other issues, as demonstrated by the steady increase in exports to Saudi Arabia and the establishment of the rupee payment mechanism to facilitate future trade between India and Iran, its prime market for Basmati exports. However, overall, tightening of pesticide residue norms by key importers could be a long-term risk for the industry," he added.

Continuing the momentum from FY18, India has already exported basmati rice worth Rs 24,919 crore (3.37 million tonnes) in the 10 months of FY19, which is 17 per cent higher than Rs 21,319 crore (3.28 million tonnes) in the corresponding period in the previous fiscal. Over the next few quarters, demand in the export market is likely to remain steady, supported by the resumption of imports by Iran, thereby driving the industry exports in FY19 to the highest ever level of almost Rs 30,000 crore, it said.

As per Icra, the average export realisations have firmed up to Rs 74,053 per tonne in the first 10 months of FY19, against Rs 64,997 per tonne in 10 months of FY18. The rising exports was due to factors like increase in paddy prices over the previous and current year's procurement season, aggressive buying by Iran in the first half of the fiscal due to the uncertainty at that time regarding imposition of US trade sanctions and its impact on trade between India and Iran and depreciation of the rupee against the USD, it added.