Indian rice exporters taking risks as Bangladesh looks to import more

Bangladesh is set to import an additional 2.5 lakh tonnes of rice from India over the next few months, with 1.5 lakh tonnes through government-to-government deals but some exporters are taking undue risks by quoting low prices, sources have said.

These imports will be in addition to the seven global tenders Dhaka has floated to import 3.10 lakh tonnes of rice. Two of these tenders for 50,000 tonnes and 10,000 tonnes were floated on January 7. While the 50,000-tonne tender closes on January 20, bids for the other can be sent in by January 18.

Indian firms, including a Singapore company's subsidiary, have won five of the remaining tenders, quoting rates between $405 (Rs 29,750) and $418 (Rs 30,750) a tonne on cost, insurance and freight (CIF) basis, sources said.

While the lower bids are for non-basmati parboiled rice, the higher quotes are for white rice.

The problem for India is that some exporters who have got the orders are finding it difficult to leverage their cargo.

“Some of the exporters have not even exported 50,000 tonnes for a whole year,” said an exporter, not wishing to be identifies, pointing out to a crisis building up.

A multinational firm’s export official said that exporters had taken undue risks by quoting very low prices.

“Our exporters are trying to outbid one another to get the Bangladesh tender. Quoting $406 CIF is risky when our prices are near $400, as they could face problems of unloading at Bangladesh ports. Chittagong is a congested port and Mongla is a river-based port with limitations,” the official, who did not wish to be identified, said.

Dhaka Tribune reported that the Bangladesh Cabinet Committee on Public Purchase approved the import of 2.5 lakh tonnes from India and global suppliers on January 6.

While one lakh tonnes of the additional 2.5 lakh tonnes imports will be made from India, the world’s second-largest producer, through a global tender, the National Agriculture Cooperative Marketing Federation of India (Nafed) will ship out the rest under a government-to-government deal.

Nafed will supply one lakh tonnes of this as non-basmati parboiled rice and the rest 50,000 tonnes will be white rice to Dhaka.

Bangladesh is trying to build inventories after the supplies dwindled and local prices surged to a record as floods and heavy rains damaged the paddy crop.

Its food department officials expect rice imports to top 20 lakh tonnes and India, the world’s largest rice exporter, is seen as emerging as the beneficiary.

Two reasons for India gaining from Dhaka’s imports are that its prices are far more competitive than Thailand and Vietnam, the second and third largest exporters, and freight charges are cheaper as India is a neighbour.

India is quoting its five percent broken parboiled rice at around $385-390 (Rs 28,260-28,630) a tonne free-on-board (FOB), up over $3-7 since last week.

Thailand exporters quote up to $520 (Rs 38,150) and Vietnam shippers up to $505 (Rs 37,075) for the same grade FOB.

Sources said exporters could be left paying demurrage charges since the Bangladeshi ports are congested, leaving them either with no gain or loss.

There are problems on the Indian side as well. “It is also a little difficult to execute orders from ports such as Haldia and Kolkata. These ports have problems handling bigger vessels,” said Rice Exporters Association president BS Krishna Rao.

“It is a problem loading ships in Haldia and Kolkata during December and January due to tide. Usually, even container ships carry half their capacity,” said a New Delhi-based trade expert.

According to the multinational firm official, a Singapore-based trading firm too has burnt its fingers exporting rice to Bangladesh in the past.

Rao said small exporters could find problems in getting the required quantity of rice to export within a month.

“This is not the first time. It has happened in the past too. It is actually a pain to export to Bangladesh,” said the multinational firm official.

Record rice stocks in India and ample supplies from the Kharif harvest are helping India dominate the export market.

The government has procured a record 50 million tonnes from October 1 till January 3 through the Food Corporation of India (FCI) for its buffer stocks.

Besides, the FCI had 14.5 million tonnes of rice in its warehouses and 33.9 million tonnes of paddy that can yield 22.71 million tonnes of rice as on January 1.

According to the agriculture ministry’s first advance estimate of foodgrain production for 2020-21, India’s kharif rice production is estimated at 102.36 million tonnes this season (July 2020-June 2021) against 101.98 million tonnes last season.

(Subramani Ra Mancombu is a journalist based in Chennai who writes commodities and agriculture.)