RICE EXPORT POTENTIAL UNREALIZED

THERE IS A NEED TO LET PRIVATE SECTOR PLAY ITS ROLE

SHABBIR H. KAZMI
(feedback@pgeconomist.com)
Mar 1 - 7, 2010

That Pakistan has an enormous potential to boost its rice exports sounds like a clichÈ. The rice export is stagnant; whatever marginal increase has occurred, it is because of hike in price of rice in international market.

In the recent past prices of almost all the commodities skyrocketed due to overindulgence of hedge funds in commodities trading. Worst was the case of crude oil as its price broke all the previous records and reached US$147/barrel. Wheat prices declined to nearly half of its peak. Refined sugar price is still hovering around US$700/ton.

As regards rice production and its exports, Pakistan is fraught with some structural weaknesses. The crop needs ample supply of water but for many years country has been suffering from an acute shortage of water. A lot of quantity is damaged because of outdated husking mills operating in the country. Adding insult to injury, India has caused a big dent.

Though, Pakistan is the best known producer of Basmati rice in the world, the product is branded in the global market as 'Made in India'. Pakistan is itself responsible for this while private sector can neither be absolved. The preference to export the commodity in bulk and letting the importers to sell it under its own brand name in the retail market can be termed the mother of all evils. Though, some effort has been made by the individual exporters and also by the Rice Exporters Association of Pakistan (REAP), a lot more remains to be done.

According to some experts, lower global prices and a somewhat complacent attitude of both the government and the private sector is responsible for decline in proceeds from rice export, estimated above 30% for July-December 2009. However, in terms of quantity the decline is not of the same magnitude. REAP officials say, Pakistan earned a little over a billion dollar from export of rice during July-December 2009, and hope to achieve the fiscal year target of $2.5 billion.

In view of global recession if Pakistan achieves the target it should be acceptable to the critics. Nevertheless there is no room for complacency unless Pakistan succeeds in proving the world that it is the producer of best quality Basmati rice across the world. It is on record that nearly half of the export proceeds of rice are realized from export of Basmati.

According to sources in ministry of commerce, rice export in the second half of the year is expected to grow also because the government is trying to sell Basmati rice to the UAE, Saudi Arabia, and Iran. The government is also trying to engage the Trading Corporation of Pakistan (TCP) in rice exports after a gap of several years. According to TCP sources, there is not much scope for exporting rice to Iran for the time being because it has ample stocks. However prospects are bright for selling a reasonable quantity of Basmati to UAE and Saudi Arabia during the second half of the current financial year.

Exporters do not share this optimism. They point out that a recent TCP tender for exporting 25,000 tons of rice failed in attracting bidders. Most of them believe that after the closure of the loss-making Rice Export Corporation of Pakistan in mid-1990s the private sector had remained successful in boosting rice exports, and there is no need to once again involve the public sector in this business.

Representatives of the private sector rice exporters say that they need appropriate government policies. According to a former chairman of REAP, the near-harvest announcement of the support price of rice and flawed paddy procurement by Pakistan Agricultural Supplies and Storage Corporation (Passco) was one of the reasons for lower rice exports during first half of the current financial year.

Rice growers have their own sad stories. They want the government to announce some performance-based cash and technological incentives for the farmers prior to the start of rice sowing season instead of merely announcing a procurement price with the assumption that it would benefit farmers. The flawed procurement system often allows the middlemen to make money. They fetch crops below the support price fixed by the government. It is an established fact that the real beneficiaries of a higher support price are cash rich middlemen. At times, the growers have no option but to sell their produce at lower prices because they need cash for sowing next crop.

Rice growers criticise that Passco has no enough storage facilities for the procured stocks. Consequently, it has been failing in making direct rice purchases from the farmers. This gives ample opportunities to the middlemen to create havoc and buy large stocks of paddy at prices far below the support price.

Exporters say they are trying to penetrate further into the export markets of the UAE, Saudi Arabia and South Africa to boost rice exports. They say they are also trying to convince the Sri Lankan government to extend the duty free import of rice up to March 31st so as to increase exports to her. "Besides, we are looking into the possibility of exporting more Basmati rice to Bangladesh where there is a big demand for it," said a Karachi-based exporter. "If our efforts succeed on all fronts, we hope to achieve $2.5 billion target for this fiscal year."

According to a recent report of Food & Agriculture Organization, global rice demand is set to increase around 3% this year, whereas production may decrease by 2% and lower than an average global stock, which may keep the prices high.

In view of the global demand and supply situation rice exporters should try to penetrate further into UAE, Saudi Arabia and South Africa markets to boost its exports. The government of Pakistan should also convince the Sri Lankan government to extend the duty free import of rice. Exporters should also focus on exporting higher quantity of Basmati rice to Bangladesh where there is a demand galore.