India’s basmati industry is expected to achieve year-on-year revenue growth of 4 per cent this fiscal year, reaching͏͏ a͏͏ record͏͏ high͏͏ of͏͏ nearly͏͏ INR͏͏ 70,000͏͏ crore,͏͏ according͏͏ to͏͏ a͏͏ report.
Decline͏͏ from͏͏ Previous͏͏ Growth͏͏ Rates:
The͏͏ industry͏͏ is͏͏ set͏͏ to͏͏ experience͏͏ a͏͏ moderation͏͏ in͏͏ revenue͏͏ growth͏͏ to͏͏ 4͏͏ per͏͏ cent͏͏ this͏͏ fiscal,͏͏ down͏͏ from͏͏ a͏͏ remarkable͏͏ 20͏͏ per͏͏ cent͏͏ last͏͏ year.͏͏ Nevertheless,͏͏ revenues͏͏ will͏͏ reach͏͏ a͏͏ record͏͏ high,͏͏ supported͏͏ by͏͏ policy͏͏ initiatives͏͏ like͏͏ the͏͏ removal͏͏ of͏͏ the͏͏ minimum͏͏ export͏͏ price͏͏ (MEP)͏͏ and͏͏ increasing͏͏ demand͏͏ in͏͏ domestic͏͏ and͏͏ international͏͏ markets,͏͏ according͏͏ to͏͏ a͏͏ report͏͏ by͏͏ Crisil͏͏ Ratings.
Strong͏͏ profitability͏͏ will͏͏ lead͏͏ to͏͏ minimal͏͏ reliance͏͏ on͏͏ debt͏͏ for͏͏ funding͏͏ capital͏͏ expenditure͏͏ and͏͏ replenishing͏͏ inventory,͏͏ thereby͏͏ maintaining͏͏ stable͏͏ credit͏͏ profiles,͏͏ the͏͏ report͏͏ noted.
Government͏͏ Support͏͏ for͏͏ Exports:
Last͏͏ week,͏͏ the͏͏ government͏͏ announced͏͏ the͏͏ immediate͏͏ removal͏͏ of͏͏ the͏͏ minimum͏͏ export͏͏ price͏͏ (MEP)͏͏ to͏͏ support͏͏ basmati͏͏ rice͏͏ exports.͏͏ This͏͏ decision,͏͏ made͏͏ in͏͏ light͏͏ of͏͏ sufficient͏͏ availability͏͏ in͏͏ the͏͏ domestic͏͏ market,͏͏ is͏͏ expected͏͏ to͏͏ enhance͏͏ export͏͏ opportunities.
Continue͏͏ Exploring:͏͏ Govt͏͏ scraps͏͏ minimum͏͏ export͏͏ price͏͏ thresholds͏͏ on͏͏ onion͏͏ and͏͏ basmati rice
To͏͏ recap,͏͏ a͏͏ minimum͏͏ export͏͏ price͏͏ (MEP)͏͏ of͏͏ $1,200͏͏ per͏͏ tonne͏͏ was͏͏ imposed͏͏ on͏͏ basmati͏͏ rice͏͏ in͏͏ August͏͏ 2023͏͏ as͏͏ a͏͏ temporary͏͏ measure͏͏ to͏͏ address͏͏ rising͏͏ domestic͏͏ rice͏͏ prices.
Following͏͏ discussions͏͏ with͏͏ trade͏͏ bodies͏͏ and͏͏ stakeholders,͏͏ the͏͏ government͏͏ adjusted͏͏ the͏͏ floor͏͏ price͏͏ to͏͏ $950͏͏ per͏͏ tonne͏͏ in͏͏ October͏͏ 2023͏͏ due͏͏ to͏͏ concerns͏͏ that͏͏ elevated͏͏ prices͏͏ were͏͏ negatively͏͏ impacting͏͏ export͏͏ shipments.
According͏͏ to͏͏ the͏͏ Crisil͏͏ report,͏͏ following͏͏ the͏͏ removal͏͏ of͏͏ the͏͏ MEP,͏͏ exporters͏͏ will͏͏ now͏͏ be͏͏ able͏͏ to͏͏ sell͏͏ basmati͏͏ rice͏͏ at͏͏ prices͏͏ below͏͏ the͏͏ previous͏͏ MEP.
This͏͏ will͏͏ enable͏͏ the͏͏ Indian͏͏ basmati͏͏ industry͏͏ to͏͏ target͏͏ overseas͏͏ markets͏͏ in͏͏ lower͏͏ price͏͏ segments,͏͏ resulting͏͏ in͏͏ increased͏͏ volumes.
Nitin͏͏ Kansal,͏͏ Director͏͏ at͏͏ Crisil͏͏ Ratings,͏͏ stated͏͏ that͏͏ exports,͏͏ which͏͏ account͏͏ for͏͏ 72͏͏ per͏͏ cent͏͏ of͏͏ basmati͏͏ rice͏͏ sales,͏͏ are͏͏ expected͏͏ to͏͏ grow͏͏ by͏͏ 3-4͏͏ per͏͏ cent͏͏ year-on-year͏͏ this͏͏ fiscal͏͏ as͏͏ countries͏͏ seek͏͏ to͏͏ secure͏͏ their͏͏ food͏͏ supplies͏͏ amid͏͏ geopolitical͏͏ uncertainties.
“Domestic͏͏ sales͏͏ are͏͏ expected͏͏ to͏͏ increase͏͏ by͏͏ 6͏͏ per͏͏ cent,͏͏ fueled͏͏ by͏͏ demand͏͏ from͏͏ the͏͏ hotel,͏͏ restaurant,͏͏ and͏͏ café͏͏ segment,͏͏ lower͏͏ prices,͏͏ and͏͏ a͏͏ steady͏͏ rise͏͏ in͏͏ household͏͏ income,”͏͏ noted͏͏ Kansal.
Smriti͏͏ Singh,͏͏ Team͏͏ Leader͏͏ at͏͏ Crisil͏͏ Ratings,͏͏ stated͏͏ that͏͏ basmati͏͏ rice͏͏ companies͏͏ are͏͏ anticipated͏͏ to͏͏ boost͏͏ their͏͏ processing͏͏ and͏͏ packaging͏͏ capacities͏͏ by͏͏ 10͏͏ per͏͏ cent͏͏ year-on-year͏͏ this͏͏ fiscal͏͏ to͏͏ meet͏͏ rising͏͏ demand.
Volume͏͏ Growth͏͏ Outlook:
Volume͏͏ growth͏͏ is͏͏ projected͏͏ at͏͏ 10͏͏ per͏͏ cent͏͏ (9͏͏ million͏͏ tonnes),͏͏ which͏͏ should͏͏ offset͏͏ a͏͏ nearly͏͏ 5͏͏ per͏͏ cent͏͏ decline͏͏ in͏͏ realisation͏͏ and͏͏ contribute͏͏ to͏͏ an͏͏ increase͏͏ in͏͏ overall͏͏ industry͏͏ revenue.
Increased͏͏ paddy͏͏ output,͏͏ lower͏͏ procurement͏͏ prices,͏͏ and͏͏ steady͏͏ demand͏͏ will͏͏ motivate͏͏ players͏͏ to͏͏ replenish͏͏ their͏͏ stocks,͏͏ which͏͏ have͏͏ fallen͏͏ to͏͏ the͏͏ lowest͏͏ levels͏͏ (110-120͏͏ days)͏͏ seen͏͏ in͏͏ the͏͏ past͏͏ five͏͏ years͏͏ due͏͏ to͏͏ demand͏͏ outpacing͏͏ procurement͏͏ in͏͏ the͏͏ post-pandemic͏͏ era.
This͏͏ restocking͏͏ is͏͏ expected͏͏ to͏͏ bring͏͏ inventory͏͏ levels͏͏ back͏͏ to͏͏ the͏͏ normative͏͏ range͏͏ of͏͏ 140-150͏͏ days͏͏ by͏͏ the͏͏ end͏͏ of͏͏ this͏͏ fiscal,͏͏ according͏͏ to͏͏ the͏͏ report.
