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Pakistani Traders claim India is subsidizing rice exports, wants WTO to investigate

"Pakistani Traders claim India is subsidizing rice exports, wants WTO to investigate"

Pakistani rice traders claim that India is subsidizing rice exports in the international export market and want the Imran Khan government to take New Delhi to the World Trade Organization (WTO). However, Indian rice exporters and trade specialists believe Pakistan may not have a solid case against India.

Food safety

Last week, Abdul Qayyum Paracha, President of the Rice Exporters Association Pakistan, claimed that subsidized Indian rice exports were harming Pakistan’s export market and that Islamabad should take the matter up with the World Trade Organization (WTO) for ‘endangering international food security in violation of its rules.’

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According to Pakistan’s Dawn daily, ‘India has offered its rice at an average pricing of $360 (₹26,725) per tonne, while we have been quoting $450 (₹33,400).’  This disparity of almost $100 (₹7,425) has severely harmed our exports.’

His claims were based on statistics from Pakistan’s Basmati and non-Basmati rice exports for the current season, which ended this month, suggesting a 14% decrease in shipments from July 2020 to May 2021. Pakistan exported 3.3 million tonnes (mt) of Basmati and non-Basmati rice during the period, down from 3.87 mt the previous year.

In contrast, India, the world’s biggest rice exporter, shipped 17.71 million tonnes of Basmati and non-Basmati rice during the 2020-21 financial year, valued at ₹65,297 crore, up from 9.51 million tonnes valued at ₹45,446 crore the previous year.

Reasons for Profits

However, the value of non-Basmati exports from India fell 3.79 %, while the value of non-Basmati imports surged 146%. In addition, India has benefited because Thailand, Vietnam, and Bangladesh, India’s largest rice buyers, all reported reduced paddy production.

According to a Delhi-based rice exporter, India performed well in the global rice market last financial year because it was able to overcome logistics challenges caused by the Covid-19 outbreak.

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In April of this year, Chairman of the Agricultural and Processed Food Products Export Development Authority (APEDA) M Angamuthu told that, despite logistical problems, the Indian government-supported food security needs in other countries and assisted at every stage to expedite shipments.

After decades, India began exporting rice to countries such as China and Vietnam last financial year. Bangladesh approved a tender last week to purchase 50,000 tonnes of rice from India for $399.90 (₹29,675) per tonne.

Rice exports are projected to increase from this month onwards, according to BV Krishna Rao, President of The Rice Exporters Association (TREA).

Low offers should be questioned

However, Paracha pointed out that nations such as Cambodia, Myanmar, Nepal, Thailand, and Vietnam offered rice at rates ranging from $420 to 430 (₹31,175 to 31,925) per tonne, and he asked how India could offer rice at such low prices.

According to the Pakistani rice trade representative, India’s shipments violated WTO norms. However, Indian exporters and analysts dismissed his claim as ‘mere pressure tactics.’

‘Indian prices are determined by market fluctuations. Thailand reduced its prices by $50 (₹3,725) per tonne last week, and we were forced to respond. Exporters buy from millers and ship it; there is no subsidy involved,’ claimed an official from rice exporting firm on the condition of anonymity.

‘Pakistan does not have a case,’ claimed the official, who was backed up by others.

‘There is no subsidy involved in Indian rice exports. Who is supplying exports? Pakistan commerce is attempting to pull a ruse,’ remarked a dealer in Delhi.

‘There is no case against India in relation to rice exports.  We have a good crop, so we can supply rice at a reasonable (competitive) price. This year, we will be more competitive since output may increase further,’ said Vidya Sagar VR, Director, VM Bulk Logix.

Prices as of now

Currently, India offers steamed 5% broken rice for $365-370 (₹27,100-27,450) per tonne, whereas white rice 25% broken is quoted for upwards of $390 (₹29,950) per tonne (all F.O.B or free-on-board).

As per the International Grains Council, Thailand’s 5% broken white rice is priced at $421 (₹31,250) F.OB., whereas Vietnam’s is priced at $460 (₹34,150) F.O.B.

Furthermore, India’s rice exports have been aided by record production in the current season (July 2020-June 2021) predicted at 121.46 mt, up from 118.87 mt the previous season.

Furthermore, India has been carrying huge rice stocks, with the Food Corporation of India (FCI) holding 29.92 mt of rice at the start of this month, in addition to 28.69 mt of paddy, which may yield 19.22 mt of rice.

Analytical abilities are essential

According to a trade analyst who spoke on the condition of anonymity, if Pakistan decides to bring a lawsuit against Indian rice shipments, it will require someone with strong analytical skills to back its allegations.

‘The US Department of Agriculture has already claimed that India’s domestic support violates WTO subsidy levels.’  Pakistan is welcome to join,’ the analyst stated.

‘In particular, they may always point to electricity subsidies and other similar things, which are referred to as non-products specific support, and claim that they violate WTO rules. However, it will all come down to who interprets the norms correctly,’ he stated.

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TREA’s Rao, on the other hand, stated that Pakistan must give documentary evidence. ‘ It’s the same reason we couldn’t bring a lawsuit against China,’ he added, adding that Islamabad had no case and that Paracha’s statement ‘should not be taken seriously.’

The peace clause of Bali

According to the analyst, in its defense, India can remind out that during the Bali ninth Ministerial session in Indonesia in 2013, all WTO members accepted a peace provision for trade facilitation in which food security of countries would be viewed as vital to helping farmers’ sustainability. According to this, India cannot be accused of distorting global trade.

‘This is a closed case. Unlike affluent countries, India does not provide cash assistance to farmers. It is a policy choice to offer minimum support prices.’ Pakistan has no legally tenable case,’ the analyst concluded, summarising Islamabad’s condition.

According to the expert, the US has been unable to pursue its case against India’s domestic assistance measures because of these factors.

With the minimum support price for paddy increasing to ₹1,940 per quintal from ₹1,868, more land might be converted to food grain the next season.