India's Export Duty on Parboiled Rice Sparks Shipping Delays, Fears of Supply Shortages

India's recent decision to impose a 20% export duty on parboiled rice has triggered a ripple effect in the global rice market, prompting buyers and sellers to navigate strategic delays in shipments. Leading exporters have revealed that approximately 500,000 metric tons of rice shipments have been postponed until after mid-October to sidestep the imposed tax, according to information provided to Reuters on Tuesday.

This development, stemming from the world's largest rice exporter, could have far-reaching consequences for import-dependent nations like Benin, Ghana, Côte d'Ivoire, and Liberia. These countries, which are already grappling with rice prices near multi-year highs, may experience further supply shortages and an additional surge in local prices due to potential inventory depletion.

With a sense of urgency driven by impending state elections and the need to curb inflation, India expanded its export restrictions on rice. The 20% duty on parboiled rice, slated to remain effective until October 15, represents a substantial move aimed at stabilizing domestic prices and addressing supply concerns.

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Industry insiders have reported a tangible impact on shipping dynamics. "Buyers are postponing the shipments; nobody is willing to pay the duty," revealed Himanshu Agarwal, Executive Director at Satyam Balajee, a prominent exporter. B.V. Krishna Rao, President of the Rice Exporters Association (REA), echoed this sentiment, stating that shipments totaling around 500,000 tons have been halted.

The imposition of the export duty has not only resulted in shipping delays but has also propelled rice prices to unprecedented levels. Last week, Indian exporters were offering the 5% broken parboiled variety at $450-$455 per metric ton. However, prices have since soared to record highs, ranging between $520 and $540 per metric ton—an escalation of nearly 40% compared to the previous year.

This surge in prices was a concern even before the export duty came into effect. "Even before India imposed the duty, buyers were uncomfortable with the rising prices. Buyers from African countries can't afford to buy at the current price level," noted Rao.

The outlook for supplies is anticipated to improve with the upcoming harvesting of the summer-sown crop in October. This harvest is projected to lead to a reduction in local paddy prices, ultimately influencing export prices for rice. India, renowned for its robust agricultural sector, exported a record-breaking 22.2 million tons of rice in 2022, with parboiled rice accounting for a significant portion.

With major rice producers like Thailand, Vietnam, and Pakistan also adjusting their prices upward in recent weeks, importing countries find themselves in a challenging predicament. "African buyers think the best bet is to delay shipments and wait for the price correction," explained a dealer from a global trade house based in New Delhi.

Interestingly, lower-income consumers in Asia and Africa had traditionally favored 100% broken rice, which was priced at $325 per ton. However, India's decision to ban exports of broken rice last year has led to a shifting market landscape. This, combined with India's restrictions on non-basmati white rice exports, has contributed to the ongoing rally in global rice prices.

As the world navigates these shifts in supply, demand, and export policies, the repercussions on global rice markets and import-dependent nations will remain a critical point of observation for stakeholders and consumers alike.

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