Why can’t we buy basmati for Rs 40/kg?

RICE COMPANIES are toasting a reported decision by the government last week to let basmati be exported at a reduced price tag of $800/tonne or close to Rs 40/kg. But if foreign consumers can be supplied this luxury food so cheap, how come you and I are paying through our noses for it? I'd help you join the dots. Logically, if basmati can be exported to Europe, Saudi Arabia, USA and Iran at just Rs 40/kg, we should be able to buy it for even less in local wholesale markets, right? Wrong. Because this price does not exist. Cheap basmati is an oxymoron. The cheapest basmati variety currently is Pusa and no rice mill in Haryana and Punjab is selling it for less than Rs 60/kg or $1100/t. Add retail margins and you have an MRP of at least Rs 75/kg, which is what we pay mostly. The top-end basmati variety Pusa 1121 is priced Rs 75/kg at factory gate or $1500/t, which makes it the world’s most expensive rice. Moreover, if Indian consumers are willing to pay two times more for what basmati fetches abroad, surely it would make more sense for our canny brands to concentrate on the more profitable domestic market instead of exports. But they are not. In short, India’s new rock bottom basmati export price is the stuff of consumer fantasies. There is no sign of it in the marketplace.

So why did the government agree to drop basmati’s threshold price in the world market for boosting business at a time when the country is short of 15 million tonnes rice? The answer to that lies in the magic word Pakistan. The rice industry has figured that “threat from Pakistan” is the easiest phrase to motivate or explain away any government decision. And it worked like a charm once again.

Basmati exporters say it is necessary to bring down the MEP to help them wrest back the global market share they lost to Pakistan. Exporters also argue that while some varieties such as Pusa 1121 are incredibly expensive, others such as Pusa Basmati can’t cross the $1100-barrier. But they omitted to mention three vital facts. One, though they claim to have lost market share, India’s basmati export has actually spurted sharply in the last six months. Two, Pakistan has always priced itself at a 20% discount to Indian basmati. So if the average price in Karachi is $900/t, India at $1100/t is par for the course. Three, there is no basmati available in India for $800/t. Meanwhile, the decision is certainly troubling for us taxpayers and consumers. For more than a decade now, we have been funding research, export subsidies and legal costs of protecting basmati in the world market all in the name of safeguarding a premium and heritage product. But now it seems the product has lost its premium positioning. At Rs 40, many other non-basmati varieties cut the grade too. So it’s time taxpayers question government spend on basmati. Availability of rice is an even bigger reason for worry in this drought year. Rice companies have often argued that exporting one tonne of basmati earns enough dollars to import 2.5 tonnes ordinary rice. Not any more. If the Rs 40 price is correct, then exporting one tonne basmati allows India to import less than a tonne long grain rice today. If India turns net rice importer, we won’t be able to make good the shortfall.

Consumers have a right to be upset with any export promotion scheme that allows food to leave the country at prices which are not available to them. At a time when parmal rice is retailing for Rs 40/kg in most metro cities, if the government is convinced basmati is also available at the same price, it has been horribly misled. Either that. Or basmati brands are charging us extortionate prices.

Foolish chaps....

Will post more interesting observations as and when I find some.

Cheers !

Prasad

An interesting Ad

The Budget and People Like Us

Ever since I started earning for myself, I have followed, at least attempted to follow, Budget proposals closely. And the one constant has been this: whatever the announcements, by whoever, it invariably never ever makes any positive difference to my own budget. I don’t gain a penny, but lose many.

Amazingly, whether it is Manmohan Singh, Yashwant Sinha, P Chidambaram or Pranab Mukherjee, after no Budget have I, or some People Like Us (PLU) that I know, rubbed two hands in glee and said, ``Wow, this year’s gonna rock for us.’’

Somehow, in the end, we end up spending a bit more than the last year. If LCDs become cheaper, the cable guy jacks up his rates. If tea becomes cheaper, milk gets dearer. If cars cost less, petrol costs more. If I save Rs 3,000 at the end of 365 days because the income tax exemption limit has been raised, I spend Rs 6,000 more because transportation charges have gone up and my subzi walla says he’ll have to take a little extra for that tomato, potato, bhindi and lauki.

For the bulk of PLU, especially those employed by others, which is almost all of us, the bottom lines, more or less, remain what they are and life goes on in exactly the same manner after the Budget as it did before it. If anything, you should be happy when the Budget guarantees status quo. Because, come to think of it, the Budget seldom has anything for the PLU.

So you peer close to the TV as the finance minister makes his grand speech, quoting from everybody under the sun – from Gandhi to Mandela, Kabir to Nanak, saint to scoundrel – to make the boring exercise sound interesting. And you look busy as hell as you turn away the kaam wali bai when she asks if the Budget will make any difference to her life. You don’t take the unimportant calls, and the important ones you try to cut it suitably short, making sure the sound on your TV is loud enough to reach the guy on the other side of your phone. You skip your breakfast and delay your lunch. And you discuss with everybody the various things that were announced by the FM but are actually of no use to you – like branded jewellery being fully exempt from excise duty.

But when you get out of your office at the end of the day – with most of your proposals on hold because your boss, too, was busy with the Budget – and hit the hard road home, you realize nothing has changed for the better. The edgy cab driver suddenly charges you more because fuel prices have gone up, the pirated CD you pick up is rented out at Rs 5 plus and the gardener you pass by makes a quick request for a wage hike because he’s just heard Budget se bhao badh gaya hai.

And so, what did I gain from Pranab da’s budget? Zilch. As usual. But then that’s always the story with the Budget and People Like Us. Why do I keep forgetting!

-Prasad