On September 30, shares of rice-exporting companies KRBL and LT Foods saw a notable increase of 4% each following the Indian government's decision to reduce export duties on parboiled rice. The duty was cut from 20% to 10%, a move that is expected to benefit the rice export sector as the country gears up for the next harvest.
Lower export duties to boost stock performance
At 09:49 AM on the day of the announcement, shares of LT Foods and KRBL were trading at ₹403.15 and ₹303.75, respectively, on the NSE. The reduction in export duties will likely make Indian rice more competitive globally, resulting in higher exports and revenues for companies like LT Foods and KRBL.
Export duties rolled back after previous hikes
Earlier in 2023, India had imposed a 20% export duty on parboiled rice following poor rainfall, which affected the crop's yield. This higher duty aimed to manage local demand and food inflation. However, with inventories now swelling and a new harvest expected soon, the government has reduced duties on brown and husked rice to 10%. This is seen as a strategic move to clear stockpiles and support the country's standing as the world's leading rice exporter.
White rice export duty eliminated
In addition to parboiled rice, the export duty on white rice has been entirely removed. This change is expected to further enhance exports, particularly to markets in Europe, the Middle East, and the United States, where demand remains strong. The scrapping of the minimum export price for basmati rice earlier this month was another step aimed at aiding rice farmers and exporters.
Key takeaways
Investment opportunity: The surge in stock prices presents a promising opportunity to invest in stocks related to rice exports, as these companies are poised to benefit from the government's export-friendly policies.
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