Rice industry needs a comprehensive strategy: Infomerics
The report “Rice Industry — Emerging Contours” by Infomerics is optimistic about the future of the rice industry in India. It highlights the need for a comprehensive rice strategy, with a focus on new systems, technologies and new rice seed varieties. It underlines the need for immediate attention to the industry risks — container shortage, scanty rainfall and low MSP coverage.
Despite some significant region-specific differences, generic factors such as government support in rice production, favourable monsoons, rising number of rice processing companies and increasing exports have positively impacted the Indian rice industry, reports Infomerics Valuation and Rating Pvt Ltd, the noted SEBI-registered and RBI-accredited financial services credit rating company. It underlines the need of immediate attention to the industry risks — container shortage, scanty rainfall and low MSP coverage.
Released on October 7, the report “Rice Industry — Emerging Contours” is optimistic about the future of the rice industry in India. It highlights the need for a comprehensive rice strategy, with a focus on new systems, technologies and new rice seed varieties. It lists the government initiatives on bringing about structural changes in the sector and the efficient ways to reduce the extent of dependence on the vagaries of the monsoon.
Positive outlook of the industry
India is the world's second-largest producer of rice after China with a production of roughly 120 million tonnes (MT). In both Kharif and Rabi seasons, rice production has been seeing an increasing trend over the years. The total production rose by almost 15 per cent from FY14 to FY21. Rice (including basmati and non-basmati) occupies a major share (more than four-fifths) in India's total cereals export.
The quality of Indian Basmati is world-renowned, and India exports its basmati to the world. It is interesting to see that almost two-thirds of the basmati export is accounted for by five nations — Saudi Arabia, Iran, Iraq, Yemen Republic and UAE.
Telangana, Tamil Nadu, and Andhra Pradesh constitute over 80 per cent of the total area under paddy cultivation, which rose from 30 lakh hectares in FY20 to 35 lakh hectares in FY 21.
Besides, the government is fortifying rice distributed under government schemes, viz. Public Distribution System (PDS) and Mid-Day-Meal scheme. It distributes over 300 lakh tonnes of rice under the National Food Security Act (NFSA). The Centre allocated 328 lakh tonnes of rice for Targeted Public Distribution System (TPDS), Mid-Day-Meal (MDM) and Integrated Child Development Scheme (ICDS) under the NFSA in FY22.
Increases in rice procurement and Minimum Support Price (MSP) have also been the focus of the government. Total rice procurement rose by 14 per cent from the marketing year 2019-20 (50.58 million metric tonnes) to the marketing year 2020-21 (57.82 million metric tonnes).
The MSP almost doubled in the last decade. Recently, the government announced the MSP at Rs 1940 per quintal for ‘common paddy’ and Rs 1960 for ‘Grade-A paddy’ for the marketing year 2021-22.
Rice production is beset with a variety of risks. High fertilizer prices, plummeting water tables, soaring agricultural input prices and asymmetric market price information constitute the risk factors. Other issues include high rent charges of agricultural machinery, poor transportation, poor consultancy facilities, and adequacy, timeliness and cost of credit.
Diverse setting significantly impacts seasonal concentration, spatial spread, and loss of about 10 per cent of paddy/rice in processing, storage and transport. Heterogeneity of rice milling mills in terms of kind, capacity location, services and ownership makes the application of any standard investment, cost and return template difficult.
Besides, three industry-specific risks have been identified. The first is container shortage. About 25,000-30,000 containers are lying at ports because of disputes with Customs, etc. Basmati rice exports have been hit hard because 80 per cent of these is routed through containers.
Two, erratic rainfall could affect crop production. Farmers have planted hectares of land with rice this year with fears of scarce rainfall although the Indian Meteorological Department (IMD) has forecast the country will receive normal monsoon rains in 2021.
The third risk is that of low MSP coverage. Insufficient MSP realization is reflected in paddy households selling their produce to the APMCs reducing from 17 per cent (2013) to 2.7 per cent (2019) because of poor participation of private traders, low infrastructure, unawareness, etc.
Paddy/rice production in India cannot be considered in a silo; it is inextricably linked to the broader question of land rights and land ownership, food security, political stability, preservation of natural ecosystems and agricultural diversification. Stringent international food quality and safety standards of EU, US and Japan can help to enhance the quantity and quality of organic production.
Since Indian agriculture continues to be a gamble in monsoon, risk mitigation measures, crop insurance, price stabilization measures, stress on geographical indicators (GI) of basmati rice in India and optimum use of agro-climatic conditions can reduce the dependence on the monsoon.