India's rice export curbs may hit winter harvest

By Mayank Bhardwaj

NEW DELHI (Reuters) - India's winter harvest of rice could shrink 5 percent this year if some farmers switch to oilseeds on worries that export curbs could lead to lower prices, a leading trader said on Friday.

While the winter crop makes up only around an eighth of India's rice output, any sign of falling production in the world's second-largest exporter could help support Asian prices that have already more than trebled this year.

With just 30 million tonnes of the grain traded annually, government supply curbs, such as those in India and Vietnam, have spooked importers at a time when global stocks have halved from a record high in 2001. India, the world's biggest exporter of rice last year after Thailand, has slapped a tax on overseas sales of its aromatic basmati variety of rice.

"Farmers will get 15-20 percent less from rice processors or exporters and they may switch to oilseeds," Prem Garg, managing director of the Lal Mahal group, told Reuters in an interview.

"If we have to pay higher tax, we cannot pay farmers much to procure paddy," added Garg, who said his firm shipped around a fifth of India's total exports during the year to March 2008.

Summer-sown rice, which accounts for most of India's 92 million tonnes of total output from two crops, is planted during the monsoon months of June and July and harvested by October.

Before the government banned exports of non-basmati rice in March, India used to export 4 million tonnes of a year, including about a million tonnes of aromatic basmati, which is exclusively grown in the northern parts of India and Pakistan.

"I believe rice production can fall by 5 percent due to the decisions of the government to ban non-basmati rice exports and restrict basmati exports," Garg added. "Farmers will not be interested in rice anymore."