Both basmati and boiled non-basmati rice that was being sent out is now stuck while it’s being transported, reducing cash flow and forcing some processing plants to reduce how much they’re doing.
Supply chain disruptions squeeze exporters
Exporters say the price to ship goods has gone up by 30 percent and there aren’t enough shipping containers available. This means orders aren’t being filled and agreements with buyers are up in the air. The delays at ports are making the problem even worse; rice is at the factories and in storage buildings even though there are people in the Gulf and West Asia 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 countries like Iran, Iraq, Saudi Arabia, Jordan, and Dubai, but the increased problems around Iran are stopping that flow.
Industry groups say some processing plants in Raisen have already had to close for a short period because exports have stopped. What used to be a reliable, ongoing stream of shipments is now a collection of late deliveries, adjusted dates for shipments, and increasing costs to store the rice.
Raisens basmati pipeline stalls
Locally, Pusa Basmati rice is now selling for Rs 300 to Rs 500 less per quintal because demand for export is going down and there’s more and more rice being stored. Because of this price drop, farmers aren’t bringing as much paddy (unmilled rice) to the mills, which weakens the entire supply chain and creates worry about plans to buy rice during the harvest season.
Farmers are suffering, and smaller and medium-sized processing businesses are the most vulnerable to unpredictable cash flow. If the conflict continues, people involved warn that businesses could have trouble with their finances, causing more plants to cut back on production or close temporarily, leading to more people losing their jobs and income.
According to district officials, Raisen grows excellent quality Pusa rice that is sold as coming from Haryana (under Haryana’s GI tag). The district plants rice on around 345,000 hectares (a large area of land) and makes over 600,000 tonnes of rice each year, showing just how much the area is affected by problems with international trade.
Financial strain from freight escalation
Experienced people in the trade say shipping container prices, which were around $2,500, are now hard to get for even $3,200. The higher shipping costs have 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 to operate.
Wholesale traders say farmers are bringing less and less paddy to the local markets and only have a few days’ worth of rice they haven’t sold. This situation could make price changes even more extreme if shipping isn’t sorted out quickly.
Balaghats non-basmati exports slump
Balaghat, which is known for its boiled non-basmati rice, is facing the same difficulties. Before the war, mills in Balaghat, Warasivani, Katangi, and nearby areas shipped around 500 tonnes every day. Exports to East Africa have almost completely stopped, and only a few shipments are going to West Africa.
Shipping by sea has become so expensive that many shipments are no longer profitable, according to mill owners. People with knowledge of the situation estimate that about 25 percent of the business of larger companies has been affected, and many smaller businesses have completely stopped as their profits disappear and they don’t get any more orders.
Balaghat’s boiled rice has a specific label showing it comes from that district and usually goes through the port of Mumbai. But because shipping routes are difficult, even this usual route is unreliable, and the rice industry is exposed to delays and charges for keeping goods at the port too long (demurrage).
Farmers and millers face price and liquidity pressures
A mill owner said that if exports stay weak, the price of rice locally could fall from about Rs 1,800 per quintal to Rs 1,600. This would go well below the government’s minimum support price of Rs 2,382, putting even more pressure on farmers’ incomes and the government’s plans to buy rice.
As more rice is stored and payments are delayed, the mills are short of cash which will affect prices in the markets, workers’ pay, and the cost of keeping the mills running. These cash flow problems also happen at the same time as needing money to fund the next harvest, and getting a loan will be very important.
If these problems continue, there will be a second effect on businesses that support rice processing, like packaging, transportation, and warehousing. This will make the local economies, which depend on rice processing and trade, even worse.
Outlook and policy options
In the short term, the focus is on getting rid of the backlog of shipments and making shipping easier. Exporters are looking at different routes and ports, sharing containers, and sending shipments in stages. Protecting against changes in shipping costs (freight hedging) and booking shipments together might help to control price increases and make sure clients get their orders on time.
Regarding finances, getting paid more quickly is vital. People involved say extending export credit (loans to exporters), temporarily reducing interest rates, and increasing the amount of working capital available are practical ways to help. Speeding up tax refunds and giving partial guarantees could also ease the cash flow problems for smaller businesses.
In the medium term, it’s important to find new markets. Producers can sell to more places than just the Gulf and East Africa, offer rice that has been processed further and is a brand name, and be sure of the quality by making the origin (GI) clear and using a digital system to track the rice. These things will give them more control over prices and make them stronger against problems from outside.
