The world of rice exports is constantly changing, and recent developments in key exporting countries are shaking things up. Let’s take a look at what’s happening in India, Thailand, Vietnam, and Bangladesh to understand the forces driving the industry.
India’s Rice Export Duty Tension, Raising Rice Prices
India, a major rice exporter, has seen export rice prices rise this week due to a government adjustment of rice shipment duties. This means Indian traders need to adjust their pricing strategies. The popular 5% broken parboiled variety is now priced at $550-$558 per ton, up from last week’s $543-$550. Earlier this month, prices hit a record high of $560.
This increase is due to a government decision last August to impose a 20% duty on parboiled rice exports to control domestic prices. But now, the government is calculating a 20% export duty on the total transaction value, not just on the Free on-board (FOB) price, thus resulting in additional duty payments. This has put a burden on Indian exporters.
Additionally, Indian exporters have received notices from the customs department demanding payment of duty differentials on rice exported in the last 18 months, four exporters told Reuters, a rare tax demand that could cripple rice shipments from India.
Exporters don’t have the financial muscle to pay the duty difference for nearly two years; instead, they would close the business, said an exporter based in the southern state of Andhra Pradesh. “The government is now demanding additional duty, which no overseas buyer will pay to us. How could we then pay the additional duty to the government?” he asked.
Despite the significant implications for the rice export industry, there has been no official comment from the finance ministry or the Central Board of Indirect Taxes and Customs.
“We’ve had to raise prices since the government is considering the total transaction value instead of Free on Board (FOB) value to calculate the 20% export duty. This has pushed our export prices higher,” said a New Delhi-based dealer with a global trade house.
In response to the situation, the Rice Exporters Association plans to engage with the government to address the impracticality of the current duty demands. President BV Krishna Rao has emphasized the need for a flat duty on future exports to avoid similar confusion.
The unanticipated tax demands are projected to significantly affect exporters financially. Estimates suggest exporters could face an extra duty of approximately $15 per metric ton on rice shipped in the last two years, amounting to an estimated total cost of around Rs 1,500 crore. With the rice export sector already operating on narrow profit margins, many exporters are contemplating legal recourse instead of adhering to the unexpected tax burden.
Takeaways from Other Asian Rice Markets
The global rice export market is facing challenges, not just in India but also in countries worldwide. Maintaining stable rice prices has become a widespread struggle across nations. Let’s look into the situation in other nations.
Thailand
Thailand, another big player in rice exports, is experiencing a different story. Prices for their 5% broken rice variety have dipped to $585-$590 per ton, down from $615 last week due to a weakening Thai baht while domestic prices remain largely unchanged. The Thai baht fell 0.5% against the dollar so far this week. There is some demand with a potential tender from Indonesia, a trader said without specifying the size of the deal. However, some support from Indonesian buyers has helped soften the blow.
Vietnam
Vietnam’s rice market is holding steady, with the 5% broken rice variety priced at $590-$595 per metric ton. However, Vietnamese exporters face challenges due to a predicted decrease in rice imports by the Philippines, a key market. This anticipation has led them to buy less rice from farmers, impacting the supply chain.
Bangladesh
Despite good rice yields and reserves, Bangladesh is struggling with high rice prices. The government is considering allowing private traders to import up to 300,000 tonnes of rice to address this issue. This strategic move aims to bring balance to the market and ensure Bangladeshis have affordable rice, a crucial part of their diet.
Conclusion
The rice export markets in India, Thailand, Vietnam, and Bangladesh are influenced by a complex mix of factors, including government policies, changes in demand, and international forecasts. As these conditions evolve, the rice industry’s ability to adapt and make strategic decisions will be crucial for navigating the complexities of the global market.
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