India’s compliance with WTO obligations for export of wheat and raw sugar is being questioned by the US, Canada, Australia, Brazil and some other nations. The Indian government could be responding appropriately to the WTO, but, at the same time, it should also approach the WTO to stop Thailand’s massive subsidisation of paddy that will adversely impact Indian non- basmati rice exports in the near future.
Thailand’s auction of its excess paddy—equivalent to 14 million tonnes of milled rice—through a distress sale every week with it treasury booking huge losses (ranging from $4 billion to $12 billion) is leading to market distortions and is in breach of the WTO norms. This must come to an end forthwith.
India shipped out 25 million tonnes of rice (both basmati and non-basmati) in the last three years (2011-14) from the open market. No exports from official/FCI stocks have taken place and the export subsidisation is nil. India has a clean record of WTO compliance for rice.
If the Thais continue to manipulate the market by under-pricing their stocks, India may not be able to sustain an export of 10 million tonnes of rice in FY15, the figure the country achieved last year as the world’s largest exporter of rice. Other rice exporting nations like Vietnam, Pakistan, Myanmar, Cambodia, the US, Uruguay, Paraguay, Brazil, etc, will also be hurt by Thailand’s arbitrariness.
India’s 5% broken white rice is now priced at $425 per million tonne versus $400 for the Thai stock on an fob basis. The Thai rice was priced nearly $550 per million tonne almost a year ago with hardly any takers in world market. Thai farmers could not be paid for the high-priced paddy. To service the arrears due to the farmers, the Thai government is now desperately selling paddy at a discount of about $300 per million tonnes, a rebate of nearly 63%. This 63% discount is the difference in the value of paddy—procured at $470 per million tonnes from farmers under the administered price regime of the last three years but now auctioned at around $170 per million tonnes while the open market price is $190-200. Paying the farmers high prices for their paddy could have been politically expedient for the Thai government, but now it is hitting other countries’ trade.
India’s compliance with WTO norms on its export of 13 million tonnes of wheat