Friday, Feb 13, 2009

(Adds details, quotes from industry officials.)

By Arpan Mukherjee and Ratnajyoti Dutta

Of DOW JONES NEWSWIRES

NEW DELHI (Dow Jones)--India's main customers for basmati rice, Saudi Arabia and Iran, signed deals to purchase 200,000 metric tons of the aromatic grain after the government scrapped an export tax late last month, traders said Friday.

"There has been good response from Saudi Arabia and Iran after the (export) tax was removed," said Gurnam Arora, joint managing director of Kohinoor Foods Ltd. (512559.BY).

The two countries had kept away from purchases of India's new season crop - harvested from October - because the export tax, combined with a floor price on exports, had pushed up Indian prices.

On Jan. 20, India scrapped an export tax of 8,000 Indian rupees a ton ($164) and reduced the floor price to $1,100/ton from $1,200/ton.

The floor price for basmati rice exports was raised and a tax was imposed in early 2008 to shore up local supplies and cool prices.

Despite the new export contracts, traders expect basmati rice exports to be lower than last year's level of 1.5 million tons.

Industry officials said demand in Europe, another big market for Indian basmati uice, is yet to pick up as price is still high. Trade sources said buyers in Europe are willing to pay $850-$900/ton for unhulled basmati rice.

 

   Exporters Seek Reduction In Floor Price 

   India's basmati rice exporters are seeking a further reduction in the export floor price as rival Pakistan has weaned away a big share of the overseas market. 

Indian rice exporters want the export floor price for basmati rice to be reduced to $1,000 from $1,100/ton while a section of the industry has sought abolition of the floor price altogether.

"Due to the higher MEP (minimum export price), Indian rice exporters are losing markets to competitors from Pakistan and Thailand," Vijay Setia, president of All India Rice Exporters' Association, said.

As most of the export contracts are usually signed in December and January, it might be "slightly late" for Indian exporters, Gurnam Arora, joint managing director of Kohinoor Foods Ltd., said.

Pakistan is selling some of its basmati rice varieties at $800-$1,000/ton, against India's prices of $1,100-$1,200/ton.

Earlier this month, a senior official of the Indian federal government said it is considering requests from some state governments to lower the floor price for basmati exports.

-By Arpan Mukherjee and Ratnajyoti Dutta, Dow Jones Newswires; 91 11 4356 3310; arpan.mukherjee@dowjones.com

(END) Dow Jones Newswires

13-02-09 1216GMT