India Mulls Extending Export Tax on Parboiled Rice to Tackle Food Inflation Ahead of Elections

India, the leading rice exporter globally, is contemplating extending the export tax on parboiled rice to mitigate food inflation ahead of national elections. Prime Minister Narendra Modi's government, eyeing a third term, may maintain the export levy at 19 percent, according to media sources. Although there's no immediate proposal to ban parboiled rice exports, discussions are ongoing, shrouded in confidentiality. The current tax is set to expire on March 31.

If implemented, this extension could exacerbate the surge in Asian rice prices, already near a 15-year peak due to India's prior restrictions on key varieties in 2023. This development could adversely affect countries in West Africa and the Middle East, heavily reliant on India for their rice needs.

A spokesperson for the food and commerce ministries declined to comment immediately.

In December 2023, the inflation print was at 5.69%, although slightly high from 5.55% in November, but better than the street's forecasts of 5.87%.
Nevertheless, inflation in December was the highest rate in four months, owing to a sharp surge in food inflation to 9.53% from 8.7%. Food inflation in urban region saw a steep increase to 10.42% in December 2023 versus 9.33% in November, while rural food inflation picked up to 8.97% versus 8.38% in the previous month.

India has already restricted exports of wheat, sugar, and most rice types, while also clamping down on hoarding. Additionally, low import duties on edible oil have been extended for another year.

Despite these measures, rice prices in Delhi remain approximately 11 percent higher than a year ago. In response, Food Minister Piyush Goyal launched a subsidized rice program nationwide, complementing existing initiatives selling wheat flour and chickpeas below market rates.

Parboiled rice, constituting about 30 percent of India's total exports pre-restrictions, undergoes partial boiling before milling to enhance nutritional value and alter the cooked rice texture. In the global rice trade for 2022-23, India commanded a 40 percent share.

India has potential extension of the export tax on parboiled rice underscores its commitment to stabilize food prices amidst impending elections. However, this move could exacerbate global rice prices, impacting regions heavily reliant on Indian rice imports.