Rice Prices Surge 15–20%; Exporters Default on Contracts as Costs Spiral

In the span of just one month, parboiled non-basmati rice prices on an FOB basis at Kakinada port have climbed from ₹2,800–2,900 per quintal to ₹3,300–3,400 per quintal — a jump of 15–20%. A large share of the non-basmati rice destined for export originates from Chhattisgarh, and the sudden price surge has caught exporters who finalised contracts at earlier rates off-guard.

Because most rice exporters do not hold advance inventory, they typically procure grain after securing an export order, tailoring packaging and labelling to each destination market. This just-in-time model, which works well in stable markets, has become a liability: exporters are now being forced to source rice at sharply higher spot prices to fulfil orders priced at older, lower levels — and many simply cannot do so profitably. Some have already defaulted on delivery commitments.

A leading rice exporter, speaking to Rural Voice, said non-basmati rice is currently fetching $360–370 per tonne on the global market — a level that does not cover procurement and shipping costs at current domestic prices, making exports commercially unviable.

The burden is compounded by a sharp rise in freight rates. India exports substantial volumes of non-basmati rice to African countries, and freight charges for both bulk cargo and container shipments on those routes have climbed steeply, further eroding margins.

Broken rice is no different. Prices of non-basmati broken rice have also risen by nearly 20% over the month, reaching ₹2,650–2,700 per quintal. This creates an additional complication for the government's ethanol blending programme: the central pool supplies broken rice to ethanol producers at a notified price of ₹2,200–2,300 per quintal — well below current market rates — raising questions about the viability of sustaining those supplies at prescribed levels.

Basmati rice has not been immune either, though the price increase has been comparatively moderate at around 5% over the same period. The more acute challenge for basmati shipments is geopolitical: the ongoing Gulf conflict has severely disrupted exports to key destinations including the United Arab Emirates, Saudi Arabia, Iran, and Iraq — markets that collectively account for a significant share of India's basmati export volumes.

The combination of modestly higher domestic prices and logistical uncertainty around Gulf-bound shipments is adding to the stress already facing the basmati segment, even as the spotlight has been most intense on non-basmati trade.

Government data show India recorded its highest-ever rice production in 2025-26, surpassing China. Yet ground-level signals are already pointing to tightness in key supply pockets.

An official of Raipur-based BigMint Consultancy, quoted by Rural Voice, reported a "significant shortage of rice" in Dhamtari — a major rice-trading centre in Chhattisgarh — attributing it directly to the sharp price rise that has made procurement difficult for exporters.

Looking ahead, the situation may worsen. Below-normal rainfall during the current southwest monsoon season has already led to lower paddy sown acreage compared with last year. If this trend is sustained, it will dampen production in the upcoming crop year. An official of a leading rice exporting company told Rural Voice that India's non-basmati rice exports are likely to decline this year compared with last year — a reversal that would mark a significant step back for a sector that had been on an upswing.

The downstream consequences of sustained high prices extend into government operations. Higher open-market prices reduce the incentive for millers and traders to sell paddy into the government procurement system at Minimum Support Price levels, and could complicate the Food Corporation of India's ability to build adequate stocks during Kharif Marketing Season 2026-27.

If procurement falls short, it could in turn exert further upward pressure on domestic retail rice prices — a politically sensitive outcome ahead of a season when the monsoon is already underperforming. For policymakers, the near-term priority will be monitoring whether paddy acreage deficits materialise into a meaningful production shortfall, and whether corrective steps — such as revisiting the broken rice supply price for ethanol producers — are needed to prevent market distortions from cascading through multiple segments of the rice economy.