Betting big on basmati

Ramchand Batra,who earlier grew kinnow on his 15 acres of land,is stocking basmati till better prices prevail. So are many others who are not in urgent need of money. Though I am not a trader,I understand how markets operate. We are stocking up. Even if prices do not touch last years rates,they may go up to at least Rs 2,400 to Rs 2,500 per quintal, he says hopefully.

The huge jump in the area under basmati cultivation in Punjab and neighbouring Haryana this year has as much to do with poor rains as with good prices last year.

After it was granted the basmati status last year,Pusa 1121 has not only overtaken other basmati varieties but also areas under non-basmati in the two states. Nearly six lakh hectares in Punjab alone is under basmati,mainly Pusa 1121 variety,this year while neighbouring Haryana has witnessed an almost two-fold swell in area under this variety.

When supply is more,by simple economics,prices fall. So even if big corporates such as REI,KRBL,ITC and Olam International are in the fray,the highest that basmati has fetched this season is Rs 2,000 per quintal. Rice exporters term the phenomenon as stabalisation of prices.

Last year too,basmati varieties started from a modest Rs 20 per kg and peaked up to Rs 35 per kg towards its closure. But unlike last year,prices this year are likely to stabilise in the coming weeks and will not touch the earlier rates, says former All India Rice Exporters Association president Vijay Setia.

He adds that Pusa 1121 is facing many more problems than just oversupply. One year on,it is still not certified as a basmati variety by the European Union EU,which has so far certified 11 varieties,including some inferior ones. Pakistan,the other major basmati supplying country,too,has developed a new variety,Kaynat,to counter Pusa 1121. It has also cut its custom duty on basmati to derail Indian exports. The reports of Pusa 1121 being genetically modified and contaminated with heavy metals that appeared in a section of the Iranian press,the main market for India,have also led to buyer-seller disputes and piling of stocks at ports.

A major deterrent in case of Punjab is also its higher taxes. Against one per cent in Delhi and eight per cent in Haryana,traders have to shell out 11 per cent as taxes,including two per cent mandi fee,four per cent value added tax,two per cent for Rural Development Fund and three per cent as infrastructure cess. At a time when prices

are low,this tax differential further makes states basmati non-competitive.

But for farmers like Mohinder Dhingra whose family owns nearly 150 acres of land in Mohammad Piran village of Ferozepur,it has never been this bad. We have been growing basmati for many years. It is for the first time that both the rates and yield have come down. Against average yield of 20 quintals per acre,we are getting just 18 quintals per acre this year. It has also been a bad bargain for us. As compared to kinnow,which gives a profit of Rs 50,000 per acre even after meeting expenses,we will not get more than Rs 28,000 per acre from basmati this year, he adds.