Exporters in Madhya Pradesh are suddenly in a difficult situation because of the war in West Asia. Shipments of both basmati and boiled (non-basmati) rice are delayed while in transit, slowing down the flow of money and causing some plants to reduce how much they’re doing.
Supply chain disruptions squeeze exporters
Freight rates have gone up 30%, and there aren’t enough shipping containers, meaning orders aren’t being fulfilled and agreements are uncertain. The backups at ports are making things worse; rice is sitting at the factories and in warehouses even though there are people in the Gulf and West Asia who are ready to buy it.
Raisen has a lot of rice businesses – over twenty factories in Mandideep, Satlapur, Obedullaganj, Raisen, Bareilly, Udaypura and Umraoganj. They provide good quality basmati rice to places like Iran, Iraq, Saudi Arabia, Jordan, and Dubai, but the problems around Iran are stopping that rice from getting there.
Some processing plants in Raisen have already temporarily closed, according to people in the industry. Instead of a smooth, consistent stream of exports, we now have a mix of shipments being held up, delivery dates being changed, and the cost of storing the rice going up.
Raisens basmati pipeline stalls
The price of Pusa Basmati rice has dropped Rs 300 to Rs 500 per quintal because less of it is being exported and more and more is being stored. Because of this price drop, farmers aren’t bringing as much paddy (unmilled rice) to the mills, which weakens the whole system and makes people worried about the government’s plans to buy rice during the harvest season.
Farmers are being affected, but the smaller and medium-sized rice processors are the most at risk of having unpredictable money coming in. If the conflict continues, people involved say that these businesses could have trouble with their finances, and be forced to make less rice or shut down for a time, which would mean people losing their jobs and income.
Officials in Raisen say that the district grows excellent Pusa rice, which is sold as being from Haryana (under Haryana’s GI tag). Raisen farmers plant rice on about 345,000 hectares (a large area of land) and make over 600,000 tonnes of rice each year, showing how much the rice industry is affected by problems with international trade.
Financial strain from freight escalation
Experienced people in the trade say shipping container costs, which were around USD 2,500, are now hard to get for even USD 3,200. The higher cost of shipping has increased the total cost of exporting. Goods that have been shipped are stuck at ports, delaying when exporters get paid and reducing the amount of money they have available.
Wholesale sellers of rice add that farmers aren’t bringing as much paddy to the local markets and farmers only have a small amount of rice left that hasn’t been sold. This could make prices change a lot more if the transportation of goods doesn’t become more stable quickly.
Balaghats non-basmati exports slump
Balaghat, which is known for its boiled non-basmati rice, is experiencing similar difficulties. Before the war, mills in Balaghat, Warasivani, Katangi, and nearby areas were shipping about 500 tonnes each day. Exports to countries in East Africa have almost stopped, and only a few shipments are going to West Africa.
Because of the big increase in the cost of shipping by sea, many shipments are now not making enough money. People with knowledge of the situation say that about a quarter of the business of the larger rice companies has been harmed, and several of the smaller businesses have completely stopped as they aren’t making a profit and aren’t getting orders.
The boiled rice from Balaghat has a specific identification for the district and usually goes through the Mumbai port. But, because of the issues with sea routes, even this usual route is not dependable, and the rice industry is facing delays and extra charges for how long the goods are at the port.
Farmers and millers face price and liquidity pressures
Someone who owns a rice processing plant said that the price of rice in the area could fall from around Rs 1,800 to Rs 1,600 per quintal if exports remain weak. This would be significantly below the government’s minimum support price of Rs 2,382, which would put a lot more pressure on farmers’ income and the government’s rice buying program.
As the amount of rice in storage increases and payments are delayed, the mills don’t have enough money, and this could affect the price farmers get for their rice at the markets, employees’ wages, and the money available for repairs and upkeep. Not having enough money also happens at the same time as the need for money to fund the next harvest, making getting a loan very important.
If these problems continue, other businesses in the area that support the rice industry – things like packaging, transportation, and storage – could also be affected. This would make the local economy, which is closely linked to processing and trading rice, even weaker.
Outlook and policy options
For the immediate future, the goal is to deal with the delays and make the transportation of goods easier. Exporters are looking at different routes and ports, sharing containers, and sending shipments in stages. Using financial tools to protect against changes in freight rates and booking containers together could help control the price increases and keep customers’ delivery schedules.
Regarding money, getting paid more quickly is essential. People involved suggest extending export credit (loans for exporters), temporarily reducing interest rates, and increasing the amount of working capital available as ways to provide immediate help. Making tax refunds faster and offering partial guarantees could help smaller businesses with their cash flow.
In the medium term, it’s important to sell to a wider range of countries than just the Gulf and East Africa, to sell rice that has been improved or is a brand name, and to make sure the quality is good by clearly identifying where the rice is from (GI) and being able to track it digitally. Doing these things will give producers more control over prices and make them more able to withstand problems from outside.
