RICE exports suffered a sharp decline in the first month of the current fiscal year, giving rise to a pessimistic outlook for the rest of the year.

The exports amounted to $91m in July 2015, compared to $125m in July 2014, depicting a decline of 27.24 pc or $34m. Basmati rice suffered a major drop of 30pc, total export being worth $34 million while non-Basmati exports stood at $57 million, down by 25pc. Export figures in July are some 31pc less than those of June which amounted to $133 million.

Rice Exporters Association of Pakistan (REAP) has warned that during the last fiscal year the exporters had managed to keep the exports volume at $1.9 billion level, but now it may be difficult for them to maintain this level. Although last fiscal was not without serious challenges, the current fiscal may prove to be more challenging if corrective measures were not taken by the federal government.

REAP chairman attributed declining foreign sales to subdued demand in international market and sharp fall in prices. The price of Basmati rice in July had fallen to $850 per tonne from $1,200 per tonne a year ago, while price of non-Basmati rice stood at some $310 per tonne, down by $60-70 per tonne. In June, the price of basmati had declined to $871 per tonne from $895 per tonne in May, and down about 35pc from their year-ago levels of around $1,350 per tonne.

One reason for the decline in exports is stated to be the continuing decrease in per-acre yield owing to lack of introduction of new high yielding basmati varieties

A delegation of Reap had a meeting with the prime minister on September 11 to apprise him of the grave problems the rice trade was facing and presented a long list of proposals and demands for retrieving the rice sector from its present crisis. They assured him of increasing rice exports to over $4bn within next three years if their demands were accepted.

Their major demands included withdrawal of 3.5pc withholding tax on local purchase of rice, repayment of export refinance loans in 360 days instead of current 180 days, industry status or rice milling, reduction of withholding tax on rice to 0.25pc from current 1pc, no intervention of TCP/Passco in rice trade, privatisation of rice research institutes at Kala Shah Kaku and Dokri and adoption of a sui generis geographical indications law.

One reason for decline in exports is stated to be the continuing decrease in per acre yield owing to lack of introduction of new high yielding basmati varieties. In contrast, Indians have been able to dominate global basmati market because of application of new long grain, high yield varieties developed by their research institutes.

Pakistani rice research institutes had produced a long grain, high-yield Basmati 385 variety in the 1980s. Another variety called Super Basmati was introduced in 1990s. These two varieties are popular across the world for their unique taste and aromatic flavour. Since then no new variety has been introduced. But the continued use of these varieties has made them less effective and the yield has begun to fall. These two varieties were also marketed by Indians with the same brand name, claiming it was the result of their own research. The fact remains they used the smuggled seeds of Basmati 385 and Super Basmati.

While the research in rice seed development stagnated in Pakistan, the Indian researchers continued to develop new high-yielding varieties such as Basmati 1121. The per-acre yield of Pakistani basmati varieties is around 1600kg per acre while that of Indian Basmati 1121 is 2,400kg per acre. The grain of this variety is much longer than Pakistani varieties.

Meanwhile, Iran has agreed to lift ban on rice import from Pakistan following easing of western sanctions against it. Pakistan may start exporting rice to Iran from next month. A decision to this effect was taken at a high level meeting in Tehran between officials of General Trading Corporation of Iran and related ministries and a Pakistani delegation which consisted of Punjab ministers of food, agriculture and other senior officials. Iran is one of the largest rice importers and buys around 11pct of the world rice output worth $2.5bn.

In the last five years, the demand for Pakistani rice in Iran has grown by more than 35pc. There is a unique opportunity for Pakistani exporters. Before imposition of western sanctions on Iran, Pakistan was the largest exporter of rice to the neighbouring country, a position which it lost to India. Currently, almost 90pc of rice is imported by Iran from India. A former REAP chairman says Iran’s decision to lift ban will remain ineffective until proper currency transfer arrangements with banks of New York were restored.

Published in Dawn, Business & Finance weekly, September 21st, 2015

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