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In a crucial decision, the Indian government has removed the minimum export price (MEP) of $950 per tonne for basmati rice, a move that is expected to benefit rice exporters. This follows an earlier reduction in MEP from $1,200 to $950 per tonne in October.
The MEP removal is aimed at stabilising basmati rice prices, which had been on a downward trajectory due to reduced global demand. With wholesale prices expected to rise from Rs 55 per kg to Rs 65 per kg, this policy change will provide relief to exporters and bring better margins.
Impact On Exporters Amid Global Restrictions
India, the largest rice exporter globally, has been limiting rice exports to curb domestic food inflation, which led to a significant decline in rice shipments. In the first two months of FY25, India’s total rice exports slumped by 21%, with non-basmati rice exports seeing a sharp 32% drop. However, the scrapping of MEP for basmati rice opens up new opportunities for exporters like LT Foods, KRBL, Chamanlal Setia Exports Ltd, and GRM Overseas Ltd, who are well-positioned to benefit from this easing of restrictions.
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LT Foods: Eyeing International Growth
LT Foods, one of the key players in the rice export market, has reported a 17% growth in its rice segment and is optimistic about achieving double-digit growth in international markets. The company has ambitious plans to invest around Rs 200 crore in FY25, focusing on capacity expansion and digital transformation, which could further strengthen its position in the global rice trade.
KRBL: Key Export Markets Hold Potential
KRBL, a significant exporter of basmati rice, has a strong market presence in regions such as Iran, Iraq, and Saudi Arabia. Despite witnessing a 30% decline in exports in FY24, the company has maintained a steady 6% market share in the US. The recent policy changes could provide a much-needed boost to its export volumes in the upcoming quarters.
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Chamanlal Setia & GRM Overseas: Stabilising Export Performance
Chamanlal Setia Exports Ltd, which derives 89% of its total revenue from exports, saw a 4% rise in export volumes to 130 MT in FY24, even though export sales dipped by 1%. The company’s focus on the Asia-Pacific, Middle East, and Africa regions, which contributed 84% of its overall revenue, positions it well to capitalise on the MEP removal. Similarly, GRM Overseas Ltd, which generates 76% of its revenue from exports, reported a 3.4% drop in net profit in FY23 but is expected to benefit from the export price stabilisation brought by the new policy.
The government’s removal of MEP on basmati rice is a welcome move for Indian exporters, helping stabilise prices and improve profit margins.
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