BANGLADESH GOVT. IGNORES INDIAN RICE AT G TO G
LEVEL.
TEJINDER
NARANG
Bangladesh is experiencing severe scarcity of
rice this year. Government of Bangladesh (GOB) initially determined “import
demand” of 1.2 million tons (mt) of rice which later escalated to 1.5mt due to
crop losses, caused by heavy floods in the country. 75% requirement of Bangladesh is of parboiled
(PB) rice while balance 25% is of white rice (WR).
After 2011, it is the first time in May 2017
that GOB is seeking supplies from Vietnam, Thailand and Cambodia on G to G
(government to government) basis by dispatching official delegations and
simultaneously issuing import tenders of 50000 mt each. Five tenders have so far been opened. No
serious attempt appears to have been made by GOB with Indian Government to
cover their requirements from India on G to G basis. Some shipments of Indian
rice- about 1.5 lakh mt - have been made through land/sea routes by private
trade. Meanwhile rice prices in Dacca—have risen from 28taka/kg to 45
taka/kg—higher by 61% in last three months. (See chart)
India is, not only, the world’s largest
exporter of rice of about 11-12 mt annually (both basmati and non-basmati) it
also enjoys supremacy in global PB rice trade which is the major demand
component of Bangladesh. Logistically too India is a neighboring country; much
closer than Vietnam, Thailand and Cambodia; cargo can reach same day to
Bangladesh via land route or less than 3-4 days through sea. India can thus offer
prices on delivered (CIF) basis which other bidders may not be able to match
for same quality. It seems that GOB has not done serious recce and thus they
are contracting rice on customized and elevated prices, rather than market
prices, under G to G deal done so far.
VIETNAM
Graphic below indicates that G to G deal with
Vietnam (annual rice export 5-6 mt) concluded in May 2017 of 0.2mt for 5%
broken PB rice is priced at $470/t CIF which is much higher than the PB rice
sourced by GOB against their 1st tender of May 2017 at $427.85 /t CIF— cheaper
by about $43/t. It is well known that Vietnam
is an inefficient producer of PB rice of limited scales.
Likewise
50000 t, 15% brokens WR contracted at $430/t CIF from Vietnam under the
official deal is higher by $23/t or $406.48/t CIF. G to G deal is
expensive—while tendered supplies are substantially cheaper. Has Vietnam been able to make deliveries
faster than those awarded against tenders is unclear. Five tenders amply reveal
that PB rice for Bangladesh ranges around $ 420-$440/t CIF.
THAILAND
GOB also had extensive negotiations with Thai
counterparts twice but no conclusion could be arrived at. According to trade sources, Thais want to do
business on FOB basis –that is-- Thai suppliers do not want to undertake
obligations of hiring vessels and for being held liable for claims of quality
and quantity at discharge port. GOB perhaps cannot deviate from the established
procedure of CIF contracting and thus discussions remained inconclusive. Thais
too indicated exorbitant values-- even higher than Vietnam.
CAMBODIA
Another MOU is reportedly signed by GOB with
Cambodia (around end July-early August2017) to import one million tons rice
within five years. Pricing of rice, if any, is not in public domain. Long term understanding in commodity trade
seldom materializes. Cambodia’s official
export is about 0.5 mt, while balance 0.6mt is cross border unofficial trade
with Vietnam and Thailand. Cambodia is
not adept in shipping break bulk cargos and makes shipments through containers.
It will be naïve to seek 0.2 mt rice in a year from Cambodia on break bulk
basis
INDIA
It is true that while GOB approached GOI in the
past (during UPA rule) to augment their supplies through FCI but FCI adopted an
inflexible stance of delivering rice on as is where is basis and that too at
Indian ports only. This perhaps discouraged GOB from taking any proactive
approach for Indian rice under G to G business. Also FCI’s rice export through PSUs is not
feasible as this entails additional operations like re-bagging, printing on
bags, cleaning, up- grading (from 15% brokens to 5% for PB rice and to 15% from
25% for WR), transit losses etc. which PSUs cannot undertake.
The only way a commercial transaction through
PSUs can be structured is by having private partnership with rice
millers/traders who have demonstrated past performance of undertaking exports
in past 3-4 years. The PSU too should have exported rice commercially. GOB
should be able to approach through diplomatic channels for such a deal through
Indian PSUs. Market players indicate
that some discussions of GOB with Indian PSUs have taken place but then
abandoned.
It is also feasible that if private trade from
India is willing to match tendered price in the current bidding then such a
bidder could also be considered for additional 50000mt or more.
It is not sufficient to have paper contracts or
low/high prices but such contracts and prices should be able to translate into
physical deliveries of rice for the people of Bangladesh. Rice prices in India
are likely to soften in next 60days when new paddy arrives. Estimates of Indian
rice production are 108-110mt. GOB may ponder if Indian grain/agencies can meet
their requirements as it is doing for 1.25 billion population of this
subcontinent and other countries of Asia, Africa, Europe and USA.
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