As a result of New Delhi’s unexpected export restrictions, which have kept cargoes in port for nearly a fortnight and forced sellers to pay demurrage fees, at least 20 ships are waiting to load about 600,000 tonnes of rice, according to industry officials.
On September 8, India, the world’s largest exporter of grain, banned the export of broken rice and imposed a 20% duty on various other types of exports in an effort to increase domestic supplies and stabilize prices after planting was hampered by below-average monsoon rainfall.
According to B.V. Krishna Rao, president of The Rice Exporters Association (TREA), the unexpected action trapped cargo that had been transported to ports or was in transit before the government made the announcement.
“We have requested the government to provide concession to this transitional cargo as we are paying hefty demurrage charges,” he said.
A further 400,000 tonnes of rice are stuck at port warehouses and container freight stations (CFS) despite contracts being supported by letters of credit (LCs), he said, in addition to the 600,000 tonnes of rice that are waiting to be loaded at berthed vessels.
Due to the ban, shipments of broken rice are halted, but buyers and sellers of white rice are refusing to pay the 20% duty over the agreed price, according to dealers.
“When contracts were signed there wasn’t any tax on the exports. Since exports now attract the tax, there is dispute who will pay the tax over the agreed price,” said a New Delhi-based dealer with a global trading firm.
In comparable situations in the past, New Delhi has granted exemptions for contracts supported by LCs, or payment guarantees, issued up until the day the government changed its policy. But this time, that hasn’t happened.
Shipments of stuck broken rice were being sent to China, Senegal, Senegal, and Djibouti, while buyers in Benin, Sri Lanka, Turkey, and the United Arab Emirates were said to be interested in other grades of white rice, according to exporters.
Given that India exports rice to more than 150 nations, any decrease in shipments would put more upward pressure on food prices, which are already on the rise as a result of the drought, heat waves, and Russia’s invasion of Ukraine.