RICE EXPORT TARGET IMPACTING LOCAL CONSUMERS
TARIQ AHMED SAEEDI (email@example.com)
May 12 - 18, 2008
While usually market interplay causes fluctuation in prices of commodities, availability of rice that accounts for surplus production beyond meeting the local demands in Pakistan is not affected with the demand-supply shortfall at all, therefore precisely disapproving any such excuse forwarded in favour of price surge of this pop-used food item. Despite this interplay can be exercised by the unscrupulous market elements to fleece customers through creating artificial commodity shortages, very rarely lack in supply can bring upward revision in rates. Yes if massive exports of rice in a given year shorten domestic distribution then tug in domestic price is likely to occur. But this seems to be happened occasionally, at least in statistics term.
Total local populous consumption of rice is about 3.3 million tons while around 5.5 million tons is the total national production that shows far a pole distance between production and local demands. Certainly, the surplus is subject to be exported to become major foreign exchange spinner for the country. Being characterized as a billion dollar group, rice exports have been earning the country over 1 billion dollars in track records of fiscal year.
"Perhaps, which is why government has to think on the rational line to increase the export targets, after all rice significantly minuses trade deficit," said Mohammad Azhar Akhtar, Chairman Rice Exporters Association of Pakistan (REAP). While talking to this scribe from Lahore, he said, the export target set for this financial year 2007-08 is 1.8 million tons in quantity and $1.5 billion in cash value.
Irri and basmati are two of the exportable varieties of rice. Pakistan's basmati rice enjoys a good foreign market reputation and hence relatively receives high bid price at the international commodity exchanges when compared to the domestic market. Apart from this, present global food shortages have also fuelled the rice price rise. The price of rice in the international market had crossed over $1,000 per ton that analysts believed was inexplicit price behaviour while Government of Pakistan has also fixed $1500 per ton rice exporting price. It is quite comprehensible why export of rice has more commercial viability in Pakistan's perspective. International good price offer makes export a profitable happening.
Besides, Chairman REAP, while reconfirming the inaccessibility to good quality rice of local consumers, said, "basmati is not a staple food and a luxurious item that has to be exported to earn foreign exchange to curtail load of the trade deficit over balance of trade." Additionally, whereas he added 2/3 of irri and 1/3 of basmati are exported across the border. The total export of irri rice from Pakistan is more than 51 percent. Basmati covers up the empty gap.
According to an estimate, during the last fiscal year the country exported roughly around $569 million worth of irri rice. In relation to price tag, irri offers competitive rate to domestic consumers. Therefore, low price of irri as compared to basmati increases its local consumption. In last fiscal year, export receipts from rice were to the tune of $1.12 billion, of that basmati rice had 49% share. The exporting destinations of the country's rice are mainly Dubai, Kenya, Oman, Yemen, Singapore, Saudi Arabia, etc.
In recent months, prices of basmati and non-basmati genres have been exhibiting a turbulent upward trend. The prices of all local available rice batter repeated shots at the monthly household's expenditures of the common people. Once stood at Rs. 60 per kg, the price tag of good quality rice was galvanized to be sold at Rs. 90 per kg, and that was so within hardly two to three months.
It is evident that local production of rice is sufficient to meet the domestic demands, rather has been recording surplus for years to have been supplied in the international markets. Amidst fair market mechanism, probably, there is a less likelihood of ever-ballooning rice price. But in our country situation is clearly paradox. Mostly hoarding and stock piling alike debilitates logical determinants of pricing, creating an artificial shortage in the market to impede the smooth flow into the channel of distribution, which has otherwise capacity to maintain the demand-supply equilibrium. Chairman reiterated hoarding is the principal culprit behind the upward price trend of rice.
He told government and REAP has recently signed an agreement to administer an immediate solution to this problem. For residual months of the current fiscal year 2007-08, REAP would disburse 0.2 million tons of rice in the local market at subsidized rate while 0.3 million tons would be reserved to back up targeted exports, he informed. Moreover, under this agreement, REAP would supply processed packaged rice at Rs. 73 per kg, which is presently available at more than Rs. 100 per kg, to different utility stores nationwide. He insinuated, "Government will come into action to recover 0.5 million tons of hoarded rice."
Amongst the major rice producing and exporting countries worldwide, Pakistan is ranked on the 12th position in terms of production and is considered 5th largest rice exporting country. Seldom Pakistani exporters failed attaining the rice export target; if it was happened then in a slight difference to the target set by the government. End of this fiscal year may see untouched target as, Chairman REAP underlines, logistic and electricity problems may bewilder exporters fastened in the battle of achieving rice exports target. Excessive use of containers by cement manufacturers has elongated the storing duration of rice consignments.
Can unattained target give price advantage to domestic consumers on purchasing one kg rice as export is said to be the real cause of price disintegration? The question is to be answered. However, a little sense of corporate social responsibility in autocratic mindsets of monomaniac economic managers-who obsessively extrapolate balance of trade without analysing the social impact factors-will definitely be in the mutual benefits of society and economy. The rice crisis may be imminent in the country but because of price volatility rather than of plummeting stocks of rice. Too, rice insecurity may be ensued among ordinary country fellows in future due to steeping price inclination. Government should find long term solutions instead of strategize under adhocism within the context of country's rich rice producing farmlands.