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Delay in India’s rice shipments due to logistical bottlenecks

India’s rice exporters have cancelled their February export contracts fearing high demurrage charges owing to a shortage of freight trains. Cargoes are stuck at producing centres because there is a scarcity of freight trains required to carry the shipments to the ports. There are no bookings for fresh cargoes due to zero clarity on the future availability of freight trains.

According to rice export dealers, shipments of more than 5 million tons of non-basmati rice are stuck in the Indian state of Chattisgarh due to a shortage of freight trains and need to be transported to ports on India’s east coast. This number is a part of the 1.5 million tons of rice that India had originally planned to export in the month of January.

Speaking with Container News, Container xChange founder and CEO, Christian Roeloffs said, “There will be a long-term equilibrium of supply and demand that will be achieved by the end of this year. Freight rates are bound to fall to a new normal, much higher than pre-pandemic rates. The industry players are fighting back with their much-evolved revival strategies, and everyone is working for survival. However, in the short term, prices will fluctuate because of global disruptions that are bound to have an impact on the Indian supply chain.”

Shortage of freight trains followed by ever-increasing vessel rates and delay in shipments have put the Indian exporters in a spot as they are shelling out as much as US$30,000 per day for containers and US$5 million as demurrage charges clearing off their entire margin.

These rates have led the exporters to charge higher prices for international shipments so as to cover their demurrage charges. One of the varieties of rice produced in India – 5% broken parboiled rice now costs US$380 per ton which is the highest in the past 6 months.

India’s rivals Thailand, Myanmar and Vietnam have grabbed the opportunity to export rice at a much higher cost and even Asian and African buyers have switched to these countries having no other option. The prices of 5% broken parboiled rice in Thailand rose to the highest since mid-July 2021 and now costs US$405 per ton. It is expected that if such a situation continues then Indian exports could fall in the March quarter.

While India’s rice traders association has requested India’s Railway Ministry to increase the railway wagons, there hasn’t been any respite as the railway authorities diverted these trains to ship fertilisers. The wagons were also used to serve thermal coal power plants as power plants ran out of coal a few months ago.

Ironically, according to the Indian government’s provisional data, India covered close to half of the global rice shipments in 2021 with its exports soaring 45% from 2020 to a record 21.4 million tons. This is more than the combined exports of Thailand, Pakistan and Vietnam which are the next largest exporters of rice. India is only lagging behind because of logistics bottlenecks and half-baked infrastructure.

Sheuly Ghosh
India Correspondent

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