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Study on the Status of Rice Export and Rice Milling Technologies in India, Jammu and Kashmir

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Rice exports showing signs of improvement in 2017-18

During 2016-17, both basmati and non-basmati exports were lower (in value terms) as the key importing countries like Saudi Arabia, Kuwait and UAE experienced a sluggish economy due to fall in oil prices. The realizations for the Basmati type were lower at the back of a sluggish demand scenario. Exports to Iran fell almost by 50% as the country raised its import duty from 25% to 40% in August 2016 to protect its farmers. Also, the European Union set up stringent rules for rice imports by revising the limit Tricyclazole, a fungicide used by farmers against a disease, to 0.01 mg per kg from 1 mg per kg. In spite of this weak demand scenario, the Indian exporters maintained export volumes while they took a hit on realizations, especially on the Basmati rice in the past two years.

However, going forward, we expect the exports to pick up as the demand in the export market is showing signs of improvement. During the period April-August 2017, the export volumes for Basmati rice stepped by 4% and by 27% in value terms. On the other hand exports of the non-basmati type increased by 8.5% in volume terms and about 20% in value terms. This comes in after two consecutive years of lower realizations for the Basmati rice in the export market. Also Iran started importing from India again from March 2017 re- opening the export market for India. Additionally, China has identified 14 Indian firms from whom it will directly import Basmati rice in future. A possibility of direct export to China is being seen as an opportunity by the Indian exporters. (Sarveshwar RHP File, 2018)

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India continues to remain the largest rice exporter In spite of a fall in exports, India remained the largest exporter of rice in 2016-17 closely followed by Thailand and Vietnam. India is known for its Basmati rice which has high international demand especially in the USA and the gulf countries. Although the realizations for exports fell, the volumes remain relatively range bound in 2016-17

Strong brand identity

Strong brand positioning in both the domestic and global markets helps rice mills differentiate their products, attract customers, and build loyalty and trust. With big retail chains expanding their presence, there is greater brand awareness among consumers. A consumer prefers to buy an attractively packaged rice brand of a superior quality, instead of loose, unbranded rice. Unlike packaged rice, loose rice could expose consumers to risks of adulteration and price manipulation. For players, branded rice fetches higher margins than unbranded rice.

Larger distribution networks

Maintaining better relations with agents and customers helps players ensure a stronger distribution network and avoid high transportation costs. Wider distribution networks enable players to push their brands into wholesale and retail outlets faster and with greater ease, thereby giving them an edge over competitors. Relationship with suppliers (farmers) Paddy procurement alone constitutes 80-90% of the total cost for rice mills. Through mediators, players can ensure uninterrupted supply of paddy during the procurement season and, thus, reduce price risk. This also instills confidence in farmers, who desire such ‘preferred buyers’. Additionally, rice mills can guarantee the supply of high-quality paddy, by offering advance payments and pedigreed seeds to farmers.

Presence across price segments and PAN-India presence

The ability to offer a number of rice varieties enables companies to be present across different price points and cater to a wider customer base. Similarly, it is important for players to have a pan-India presence to build a strong market position. Diversified customer base It is important for rice exporters to have a diversified customer base, in view of any potential political or economic uncertainty in a particular country or market.

Key Risks Regulatory challenges

Any change on the policy front, such as a ban on rice exports or an increase in the minimum support price, affects rice mills.

Working capital intensity

The industry is highly working capital-intensive. Paddy has to be stored for a long time, as it is procured during the kharif season and then processed throughout the year. Moreover, the basmati rice has to be stored for 6-18 months for ageing. Companies could incur huge losses on mismanagement of working capital. Also, the majority of funds raised by players cater to working capital requirement.

Currency fluctuations

India competes with countries, such as Vietnam and Thailand, in the export market. Any significant appreciation of the rupee can lower the mills’ profitability.

Use of obsolete technology

Use of traditional and obsolete processing technology could result in low-quality output, in the form of broken rice, discoloured rice or grains of uneven shape and size, as well as other impurities and wastes. Replacing obsolete machinery with modern equipment can mitigate this risk. In addition, running extensive and regular quality checks can ensure production of superior quality rice.

Vagaries of nature

Being an agricultural commodity, paddy is subject to risks, in the form of vagaries of nature. Paddy cultivation requires a large amount of water; unseasonal rain and floods could seriously threaten the crop. (Sarveshwar RHP File, 2018).

History in India

Many of the rice processing units in India are of the traditional huller type and are inefficient. Modern rice mills are having high capacity and are capital intensive, although efficient small modern rice mills have been developed. In the year 1968, a study was conducted by the group of officials and they pointed out that pointed out that the overall supply of rice could be augmented substantially with additional yield obtained through modernization of the existing rice processing techniques. A number of studies were also undertaken and came out with the same findings. As a result, the policy of modernization of rice mills in India has since then pursued by the Government of India and various States within it. Thus, the industry has become fairly modernized and more important in economy of the country. Thus, with higher priority being given to paddy production programmes and the changing pattern of demand for rice, the milling industry has to adopt itself to the rice milling. Most of the small size mills are huller mills. Other various types are Battery of Huller mills, Huller-cum-Sheller mills, Sheller mills and modern mills.

The process for modernization of rice milling industry in the country was initiated in 1970 with a view to obtaining higher yields of rice and better quality of by-products such as bran and husk, suitable for edible oil/industrial oil extraction and as a source of fuel respectively. As a first step towards modernization, the Rice Milling Industry (Regulation) Act 1958 and the Rice Milling Industry (Regulation and Licensing) Rules 1959 were amended. In the initial phase of modernization, shellers-cum-hullers and multiple hullers were brought under purview of modernization. However, keeping in view various problems involved in the modernization of single huller mills, units existing on 27.7.1984 have been exempted from modernization. This relaxation is not available to new single huller mills set up after the date, except to certain categories enumerated under the Act and the rules made there under.

In view of the sustained efforts made by the Government, the number of modern/modernized rice mills has gone up from practically nil in 1970 to 41, 513 in 2006-07. Also the quantity of rice bran processed for oil extraction has increased from 1.87 lakhs tones 1970-71 to 43.50 lakhs tones in 2006-07. (Sukumar, R, Business today, special issue on performance of rice milling industries).

Traditional Method

Before the advent of mechanical milling, hand-pounding traditional method of rice milling was in practice. In fact, hand-pounding rice has got more nutritive value as compared to machine milling rice. In hand-pounding, a variety of implements is used such as:

  • Mortor and Pestle
  • Dhenki
  • Hand Stone (Chakki)

Mechanical Method

With the introduction of mechanized mills, hand-pounding method has steadily decreased because it could not compete with machine mills. The conventional mills in use can be categorized into three main types:

  • Huller mills
  • Sheller-Huller mills
  • Sheller cum Cone Polisher mills.

Profile of District Jammu

Jammu district derives its name from the city of jammu which besides being the winter capital of the state, is known as the city of temples. Jammu is situated on a hillock, on the bank of river Tawi and is bounded by Udhampur district in the north and north-east, Kathua district in the east and south-east, Pakistan (Sialkote) in the west and Rajouri district and POK (Bhimber) in the north-west. Jammu is located 740 24′ and 750 18′, East longitude and 320 50′ and 330 30′ North latitude. It is approximately 600 kms away from National Capital New Delhi and is linked with a National Highway. The temperature varies from cold in winter with minimum temperature touching even 0.9 degree centigrade to heat wave in summers when the temperature shoots up to 46 degree celsius. Jammu district is spread over an area of 3097 sq kms and has a population of about 13.57 lakhs as per 2001 census. It is largest populated district of the state and second largest in terms of population density which falls under the category ‘B’.

The literacy percentage of the district is 77% which is highest in the state according to 201 census. Administratively the district has been divided into 4 tehsils, 8 blocks including one municipality, 1192 villages and 297 panchayats. The district is having a National Airport situated at satwari. This district serves as the winter capital of J&K state from November to April when all offices move from Srinagar to Jammu. The district is bounded in the north and north east by the Tehsils of Reasi in the east and south east partly by Ramnagar of Udhampur district and partly by tehsil Billawar of Kathua district, in the south and south west by Kathua district and Sialkot district of Pakistan and in the north west by tehsil Nowshera of district Rajouri. District Jammu falls in sub-mountainous region at the foothills of the Himalayas. Shivalik range rises gradually in the north part of the district and merges with Indo-Gangetic plains in the south. Jammu city is at an elevation of 1030 feet above the sea level.

The district comprises four tehsils Jammu, R S Pura, Akhnoor and Bishnah. The entire district can be divided into two distinct portions. The area forming north of Jammu-Chamb road and Jammu-Pathankot road which is known as Kandi area and is comparatively under developed and is mostly rainfed. The area south of these roads is largely fed by canal and tube wells for irrigation purposes and is relatively more prosperous.( Agriculture Department, Jammu)

Strength

  • The factors required for successful cultivation of major cereals and paddy (Basmati) are available in the district
  • Productive and fertile soils with seventy percent irrigated area
  • The soils are fit for intensive cultivation
  • Receptive farmers willing to adopt improved farm technologies

Weaknesses

  • Inadequate soil health management practices
  • Inefficient and improper water management especially in paddy crop.
  • Critical technological gaps in specific areas of crop production viz seed treatment, balance fertilization, weed control and disease management
  • Poor adoption level of FYM, green manuring, vermi-composting and crop /farm residue management
  • Lesser availability of quality seeds
  • Small and fragmented holdings

Status of Rice in the Jammu and Kashmir

Jammu and Kashmir’s economy is predominantly dependent on agriculture and allied activities. With an annual turnover of over 3 billion (US$51 million), apart from foreign exchange of over 800 million (US$14 million), this sector is the next biggest source of income in the state’s economy [Directorate of Economics & Statistics government of Jammu and Kashmir, Digest of Statistics, 2010-11.]. Rice production in the Jammu and Kashmir is predominantly a mono cropped activity with a very high consumption and most important staple food than other states of India. The area under the rice is distributed by both the regions in which about 40 percent of area is with Jammu division while as 60 percent of the area is with Kashmir division. Rice play an important role in the livelihood of the people in the state, although the area under the crop is very small as compared to other states of the India with only 0.27 m ha [Directorate of Economics & Statistics, J&K, 2013-14], but at the same time plays an important role in the state economy.

Rice in Jammu and Kashmir is grown only once in a year because of the extreme climatic conditions, further it can be said that the diversity in the agro climatic which when coupled with farmers preferences give rise to wide range of grain preferences from bold, coarse grains in temperature regions to fine, aromatic and basmati in subtropical areas. At the same time the Jammu region represents almost all the zones ranging from the subtropical one to mid hills extending to high hills constituting the temperature zone. Rice production in J&K is predominantly a mono cropped activity and is grown in both the blocks with the productivity of 41quintls/hectare being the highest one in the country. Production of Rice has increased from 4327 in 1965 to 5001 (000qtls.) in 2010-11, against the area 212.00 to 261.35 (000ha) respectively. (Gupta. B.B, Salgotra.K.R, Bali.S.A. 2009) Basmati rice is grown on more than 32000 (2010-11) hectors of the area of Jammu division particularly in the R.S Pura belt which is famous in the world for its famous for its high aroma. The business from basmati rice annually fetches more than forty-five (45) crores of rupees.

Thus, the cultivation of the rice in this region offers a great potential for its improvement, but at the same time there is a much worry to the State of J&K in terms of food grain deficiency as it has already touched to 40 percent which will grow in the future as the deficiency is the process which cannot be stopped. The deficiency in food grains (Rice) can be reveled from the fact that the production of Rice in J&K is only seven lakh metric tons whereas the demand is eleven metric tonnes hence there is a miss match in demand and supply which ultimately results in the inflation.

Rice exports showing signs of improvement in 2017-18

During 2016-17, both basmati and non-basmati exports were lower (in value terms) as the key importing countries like Saudi Arabia, Kuwait and UAE experienced a sluggish economy due to fall in oil prices. The realizations for the Basmati type were lower at the back of a sluggish demand scenario. Exports to Iran fell almost by 50% as the country raised its import duty from 25% to 40% in August 2016 to protect its farmers. Also, the European Union set up stringent rules for rice imports by revising the limit Tricyclazole, a fungicide used by farmers against a disease, to 0.01 mg per kg from 1 mg per kg. In spite of this weak demand scenario, the Indian exporters maintained export volumes while they took a hit on realizations, especially on the Basmati rice in the past two years.

However, going forward, we expect the exports to pick up as the demand in the export market is showing signs of improvement. During the period April-August 2017, the export volumes for Basmati rice stepped by 4% and by 27% in value terms. On the other hand exports of the non-basmati type increased by 8.5% in volume terms and about 20% in value terms. This comes in after two consecutive years of lower realizations for the Basmati rice in the export market. Also Iran started importing from India again from March 2017 re- opening the export market for India. Additionally, China has identified 14 Indian firms from whom it will directly import Basmati rice in future. A possibility of direct export to China is being seen as an opportunity by the Indian exporters. (Sarveshwar RHP File, 2018)

India continues to remain the largest rice exporter In spite of a fall in exports, India remained the largest exporter of rice in 2016-17 closely followed by Thailand and Vietnam. India is known for its Basmati rice which has high international demand especially in the USA and the gulf countries. Although the realizations for exports fell, the volumes remain relatively range bound in 2016-17

Strong brand identity

Strong brand positioning in both the domestic and global markets helps rice mills differentiate their products, attract customers, and build loyalty and trust. With big retail chains expanding their presence, there is greater brand awareness among consumers. A consumer prefers to buy an attractively packaged rice brand of a superior quality, instead of loose, unbranded rice. Unlike packaged rice, loose rice could expose consumers to risks of adulteration and price manipulation. For players, branded rice fetches higher margins than unbranded rice.

Larger distribution networks

Maintaining better relations with agents and customers helps players ensure a stronger distribution network and avoid high transportation costs. Wider distribution networks enable players to push their brands into wholesale and retail outlets faster and with greater ease, thereby giving them an edge over competitors. Relationship with suppliers (farmers) Paddy procurement alone constitutes 80-90% of the total cost for rice mills. Through mediators, players can ensure uninterrupted supply of paddy during the procurement season and, thus, reduce price risk. This also instills confidence in farmers, who desire such ‘preferred buyers’. Additionally, rice mills can guarantee the supply of high-quality paddy, by offering advance payments and pedigreed seeds to farmers.

Presence across price segments and PAN-India presence

The ability to offer a number of rice varieties enables companies to be present across different price points and cater to a wider customer base. Similarly, it is important for players to have a pan-India presence to build a strong market position. Diversified customer base It is important for rice exporters to have a diversified customer base, in view of any potential political or economic uncertainty in a particular country or market.

Key Risks Regulatory challenges

Any change on the policy front, such as a ban on rice exports or an increase in the minimum support price, affects rice mills.

Working capital intensity

The industry is highly working capital-intensive. Paddy has to be stored for a long time, as it is procured during the kharif season and then processed throughout the year. Moreover, the basmati rice has to be stored for 6-18 months for ageing. Companies could incur huge losses on mismanagement of working capital. Also, the majority of funds raised by players cater to working capital requirement.

Currency fluctuations

India competes with countries, such as Vietnam and Thailand, in the export market. Any significant appreciation of the rupee can lower the mills’ profitability.

Use of obsolete technology

Use of traditional and obsolete processing technology could result in low-quality output, in the form of broken rice, discoloured rice or grains of uneven shape and size, as well as other impurities and wastes. Replacing obsolete machinery with modern equipment can mitigate this risk. In addition, running extensive and regular quality checks can ensure production of superior quality rice.

Vagaries of nature

Being an agricultural commodity, paddy is subject to risks, in the form of vagaries of nature. Paddy cultivation requires a large amount of water; unseasonal rain and floods could seriously threaten the crop. (Sarveshwar RHP File, 2018).

History in India

Many of the rice processing units in India are of the traditional huller type and are inefficient. Modern rice mills are having high capacity and are capital intensive, although efficient small modern rice mills have been developed. In the year 1968, a study was conducted by the group of officials and they pointed out that pointed out that the overall supply of rice could be augmented substantially with additional yield obtained through modernization of the existing rice processing techniques. A number of studies were also undertaken and came out with the same findings. As a result, the policy of modernization of rice mills in India has since then pursued by the Government of India and various States within it. Thus, the industry has become fairly modernized and more important in economy of the country. Thus, with higher priority being given to paddy production programmes and the changing pattern of demand for rice, the milling industry has to adopt itself to the rice milling. Most of the small size mills are huller mills. Other various types are Battery of Huller mills, Huller-cum-Sheller mills, Sheller mills and modern mills.

The process for modernization of rice milling industry in the country was initiated in 1970 with a view to obtaining higher yields of rice and better quality of by-products such as bran and husk, suitable for edible oil/industrial oil extraction and as a source of fuel respectively. As a first step towards modernization, the Rice Milling Industry (Regulation) Act 1958 and the Rice Milling Industry (Regulation and Licensing) Rules 1959 were amended. In the initial phase of modernization, shellers-cum-hullers and multiple hullers were brought under purview of modernization. However, keeping in view various problems involved in the modernization of single huller mills, units existing on 27.7.1984 have been exempted from modernization. This relaxation is not available to new single huller mills set up after the date, except to certain categories enumerated under the Act and the rules made there under.

In view of the sustained efforts made by the Government, the number of modern/modernized rice mills has gone up from practically nil in 1970 to 41, 513 in 2006-07. Also the quantity of rice bran processed for oil extraction has increased from 1.87 lakhs tones 1970-71 to 43.50 lakhs tones in 2006-07. (Sukumar, R, Business today, special issue on performance of rice milling industries).

Traditional Method

Before the advent of mechanical milling, hand-pounding traditional method of rice milling was in practice. In fact, hand-pounding rice has got more nutritive value as compared to machine milling rice. In hand-pounding, a variety of implements is used such as:

  • Mortor and Pestle
  • Dhenki
  • Hand Stone (Chakki)

Mechanical Method

With the introduction of mechanized mills, hand-pounding method has steadily decreased because it could not compete with machine mills. The conventional mills in use can be categorized into three main types:

  • Huller mills
  • Sheller-Huller mills
  • Sheller cum Cone Polisher mills.

Profile of District Jammu

Jammu district derives its name from the city of jammu which besides being the winter capital of the state, is known as the city of temples. Jammu is situated on a hillock, on the bank of river Tawi and is bounded by Udhampur district in the north and north-east, Kathua district in the east and south-east, Pakistan (Sialkote) in the west and Rajouri district and POK (Bhimber) in the north-west. Jammu is located 740 24′ and 750 18′, East longitude and 320 50′ and 330 30′ North latitude. It is approximately 600 kms away from National Capital New Delhi and is linked with a National Highway. The temperature varies from cold in winter with minimum temperature touching even 0.9 degree centigrade to heat wave in summers when the temperature shoots up to 46 degree celsius. Jammu district is spread over an area of 3097 sq kms and has a population of about 13.57 lakhs as per 2001 census. It is largest populated district of the state and second largest in terms of population density which falls under the category ‘B’.

The literacy percentage of the district is 77% which is highest in the state according to 201 census. Administratively the district has been divided into 4 tehsils, 8 blocks including one municipality, 1192 villages and 297 panchayats. The district is having a National Airport situated at satwari. This district serves as the winter capital of J&K state from November to April when all offices move from Srinagar to Jammu. The district is bounded in the north and north east by the Tehsils of Reasi in the east and south east partly by Ramnagar of Udhampur district and partly by tehsil Billawar of Kathua district, in the south and south west by Kathua district and Sialkot district of Pakistan and in the north west by tehsil Nowshera of district Rajouri. District Jammu falls in sub-mountainous region at the foothills of the Himalayas. Shivalik range rises gradually in the north part of the district and merges with Indo-Gangetic plains in the south. Jammu city is at an elevation of 1030 feet above the sea level.

The district comprises four tehsils Jammu, R S Pura, Akhnoor and Bishnah. The entire district can be divided into two distinct portions. The area forming north of Jammu-Chamb road and Jammu-Pathankot road which is known as Kandi area and is comparatively under developed and is mostly rainfed. The area south of these roads is largely fed by canal and tube wells for irrigation purposes and is relatively more prosperous.( Agriculture Department, Jammu)

Strength

  • The factors required for successful cultivation of major cereals and paddy (Basmati) are available in the district
  • Productive and fertile soils with seventy percent irrigated area
  • The soils are fit for intensive cultivation
  • Receptive farmers willing to adopt improved farm technologies

Weaknesses

  • Inadequate soil health management practices
  • Inefficient and improper water management especially in paddy crop.
  • Critical technological gaps in specific areas of crop production viz seed treatment, balance fertilization, weed control and disease management
  • Poor adoption level of FYM, green manuring, vermi-composting and crop /farm residue management
  • Lesser availability of quality seeds
  • Small and fragmented holdings

Status of Rice in the Jammu and Kashmir

Jammu and Kashmir’s economy is predominantly dependent on agriculture and allied activities. With an annual turnover of over 3 billion (US$51 million), apart from foreign exchange of over 800 million (US$14 million), this sector is the next biggest source of income in the state’s economy [Directorate of Economics & Statistics government of Jammu and Kashmir, Digest of Statistics, 2010-11.]. Rice production in the Jammu and Kashmir is predominantly a mono cropped activity with a very high consumption and most important staple food than other states of India. The area under the rice is distributed by both the regions in which about 40 percent of area is with Jammu division while as 60 percent of the area is with Kashmir division. Rice play an important role in the livelihood of the people in the state, although the area under the crop is very small as compared to other states of the India with only 0.27 m ha [Directorate of Economics & Statistics, J&K, 2013-14], but at the same time plays an important role in the state economy.

Rice in Jammu and Kashmir is grown only once in a year because of the extreme climatic conditions, further it can be said that the diversity in the agro climatic which when coupled with farmers preferences give rise to wide range of grain preferences from bold, coarse grains in temperature regions to fine, aromatic and basmati in subtropical areas. At the same time the Jammu region represents almost all the zones ranging from the subtropical one to mid hills extending to high hills constituting the temperature zone. Rice production in J&K is predominantly a mono cropped activity and is grown in both the blocks with the productivity of 41quintls/hectare being the highest one in the country. Production of Rice has increased from 4327 in 1965 to 5001 (000qtls.) in 2010-11, against the area 212.00 to 261.35 (000ha) respectively. (Gupta. B.B, Salgotra.K.R, Bali.S.A. 2009) Basmati rice is grown on more than 32000 (2010-11) hectors of the area of Jammu division particularly in the R.S Pura belt which is famous in the world for its famous for its high aroma. The business from basmati rice annually fetches more than forty-five (45) crores of rupees.

Thus, the cultivation of the rice in this region offers a great potential for its improvement, but at the same time there is a much worry to the State of J&K in terms of food grain deficiency as it has already touched to 40 percent which will grow in the future as the deficiency is the process which cannot be stopped. The deficiency in food grains (Rice) can be reveled from the fact that the production of Rice in J&K is only seven lakh metric tons whereas the demand is eleven metric tonnes hence there is a miss match in demand and supply which ultimately results in the inflation.

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