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The prospect of India banning exports of non-Basmati rice was first mooted last year by Finance Minister P. Chidambaram. In October, the export ban was introduced, only to be lifted in January following complaints from rice exporters.
Now, increasing economic pressure has obliged the finance minister to reintroduce the export ban in an attempt to keep prices low and avoid disputes with the government's coalition allies, the communists, which has threatened a nationwide protest if the prices of basic foodstuffs - which include rice - are not controlled at a more affordable level for the people.
In this the communists are joined by the main opposition Bharatiya Janata Party, which would certainly undermine the credibility of the government. With nearly a dozen states going to the polls this year and general elections due in May 2009, the government cannot afford such confrontation.
India is faced with the global problem of constantly increasing prices of raw materials and food. Added to this are the severe weather conditions that have affected the more productive growing areas in the world. This has created shortages which have aggravated the price increases.
India is the third largest producer of rice in the world, at around 80 million tonnes, exporting about 4 million tonnes a year, of which about a million is Basmati. The rest, together with imported rice equal to its exports, is for home consumption. But with a 25 per cent shortfall in production this year, it has left the market very exposed.
The UAE, recognising the problem, has suggested rice is sold at a fixed rate, about one-third of its wholesale price. This intervention, as with previous similar recommendations on food items, is a sure-fire way of bankrupting the importers. Tough though it is, the best solution is to let market forces prevail and, if it becomes prohibitive, for consumers to adjust accordingly.
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