UNTAPPED POTENTIAL & RESOURCES - RICE EXPORTS

FOZIA ISHAQUE (fozia.ishaque@hotmail.com)
Feb 16 - 22, 2009

Pakistan being an agro-based economy has natural abundance of all agricultural products including food items. Rice is the third largest crop after wheat and cotton. It is grown over 10% of the total cropped area. Rice is highly valued cash crop and is also major export item. Pakistan grows enough high quality rice to meet both domestic demand and allow for exports of over 2 million ton per annum. Different varieties of rice are grown in Pakistan for example Super Basmati, Basmati PK-385, Irri-6, Irri-9 and KS-282 etc. Pakistan is primarily known for its aromatic rice (Super Basmati/Basmati PK-385). These varieties are the basic or building block for other modified basmati rice being sold in the international market under basmati name. Basmati Rice is finest rice, produced in Some Parts of Pakistan and India. The main Characteristic of Basmati rice are, that it is Long Grain, Non-Glutinous, Slender ,very Aromatic and excellent in cooking and taste. The word Basmati comes from Punjabi language meaning ?smell of soil?, so soil where it cultivated plays a huge role in Basmati finest Characteristics.

Pakistan had exported rice worth $2.5 billion in 2008 and has enormous export potential in Basmati rice. It may export rice worth $3.4 billion in the current fiscal year owing to the bumper crop of all varieties. But the irony of fate is that Pakistan is losing its share in international rice exports due to increase in prices of all varieties. The prices of basmati and non-basmati rice have increased by around 23%and 30% respectively, owing to government intervention in rice purchase through Trading Corporation of Pakistan (TCP) and Pakistan Agriculture Supplies and Storage Corporation (Passco). These agencies are procuring rice to offer a support price to growers. But the this untimely decision is likely to take its toll on the export target of the country as the international market is experiencing reduced prices and our rates have become uncompetitive.

According to Federal Bureau of Statistics, Rice export has declined by 17% in value on monthly basis during December 2008, as compared with November 2008. TCP has quoted its rates at Rs 32.90 per kilogram on January 14 for the purchase of 25,000 metric tonnes, while its market price is in the range of Rs 25.77 per kg. The corporation is paying an extra amount of Rs 178 million. More than 500 rice processing mills of the country have either closed or cut their production by 70% as there are only a few export orders. Besides, power cuts have endangered the livelihood of around 200,000 workers running these mills.

Iraq, Philippine and Mauritius were the regular customers of Pakistani rice, but owing to the higher prices quoted by Pakistani traders, we have lost the market in these countries. They have signed contracts for the purchase of 7,500 tonnes of rice from Vietnam and Bangkok as Pakistani exporters were unable to match the prices. The regional countries are getting good market, however, the country's export market is shrinking as India has scrapped its 200% export duty on the commodity export and cut the floor price for overseas shipments. This factor is hurting exports of Pakistan. Pakistan once had 54% share in Saudi rice market which has now declined to less than 10% because exporters are unable to export parboil rice which is in great demand in Saudi Arabia. The ultimate beneficiary would be India which has already entered Saudi Arabian market at our cost. Interesting to note is that for the first time the exports of Pakistani rice had surged to above $1 billion in the first five months of the financial year, but as the TCP and PASSCO have started participating in the rice market, the country has been facing negative commodity's export growth. Rice Exporters Association of Pakistan (REAP) is opposing to government buying of rice via Passco and TCP Tenders, as owing to these tenders, Pakistani rice can no more compete with other origins and has lost major tenders in Iraq, Philippines and Mauritius. Inaction from government has already led to complete halt in new orders to rice exporters. This situation has lead to the closure of 70 rice export processing units in Punjab and a similar fate is expected in Sindh.

SUGGESTIONS:

1- Pakistan could export up to 4.0 million tons of rice in 2008-09 financial year but government intervention is making rice more expensive and that is hurting overseas sales. If the government's machineries stop intervention in the market it would be possible to achieve the export target.

2- The association members have lately set up parboiled plants which are run on gas and can fully meet Saudi market demand. However, owing to shortage of gas, these plants are no more functioning and exporters apprehend that they may further lose the Saudi market. Government has to ensure uninterrupted power supply to these units to restore the market share in rice exports.

3- With a bumper crop expected of more than 6.5 million tons, from 5.50 million tons the previous year, the government decision to buy rice and paddy was aimed at helping farmers and maintaining stability in domestic prices. The government was buying Basmati rice at Rs3,000 ($38) per 40 kgs, which equated to an export price of $1,300 to $1,400 a tons, leaving Pakistan uncompetitive in the international market. Instead of offering a high rate and hampering the export target, the government should give direct subsidy to growers through lower rates of urea, DAP and seeds.

4-Basmati trade mark should be registered by government agency, like TDAP and it should be the property of Pakistan and not of any individual or trade body.

5- Given the high demand in the days to come, improved production technology and appropriate post-harvest operations like threshing, drying, milling, grading, packing, transportation and storage need to be encouraged.

6- With rising export of rice, there is now greater need to have a separate ministry for rice because when rice export was privatised in 1989 it fetched $300 million only but now it has gone up to $2.2 billion in last fiscal year. The government would do better by providing a separate rice ministry, which is given the task to take the export well beyond $4 billion within next two years.

7- In past procuring rice from the few selected mills showed the government impartiality and even growers had not benefited from this move. The government had also failed to give a clear rice export policy and it was not coming up with logical reasons as to why the TCP had been asked to procure rice from the influential people. These wrong practices are to be abolished forthwith so as to avert these situations in future.

8- There is also a need to improve nutritive value of rice grain. Iron and zinc fortified and vitamin A-enriched rice grains may be more attractive and useful in exports to Asia and Africa.

Multiplying rice exports to a reasonable level seems difficult since it involves lot of awareness and marketing skills. But the increasing value of rice trade will make the effort worthwhile. It is imperative to do in-depth short, medium and long term analyses on rice production and marketing at the global level and then develop a strategy not only to maintain the present level of exports but enhance rice export from Pakistan.