THE early optimism about rice production — hope for a per acre increase of 15 to 20 per cent — may not hold this year, especially for basmati, as the crop has suffered a variety of problems, including water shortage, lack of timely rains, lowering average weight of grain and diseases.

But still, the crop size is expected to cross the figure of six million tons against 5.7 million tons of last year, thanks to the substantial increase in acreage. As price of rice in domestic and international markets almost doubled last year, the farmers went whole hog increasing area under sowing to 6.5 million acres — some 800,000 acres more than official target of 5.7 million acres.

The biggest surprise came from traditionally the non-rice belt (southern Punjab), which held 25 per cent of total acreage and may contribute corresponding yield in the final figure. The price factor took the crop in hitherto un-explored areas of the southern Punjab.

Thus, the increase in production would come from enhanced acreage, rather than per acre yield as being expected by government officials. The sheer magnitude of acreage has swept aside shortages of urea at the critical time of use, fungicides and weedicides and the Chenab water and produced a surplus that could double export figures and income if the government acts wisely – providing money to traders and ensuring that fruits of better price also reach the farmers.

If Pakistan crosses the figure of six million tons, which it most probably would, it would have around three million tons surplus for export after meeting the domestic requirements of three to 3.2 million tons.

With a standing offer from Saudi Arabia to import one million ton (half coarse and half basmati) rice, worth almost $2 billion at the current price factor, it could double export figures and income.

But increasing export this year and maintaining momentum during subsequent years, the government needs meticulous planning both on marketing and social sides. On the business front, the government, which does not play a direct role in procurement and export, should cast itself in the role of effective facilitator that could help the private sector exploit market niche as and when the opportunity presents itself – like the one offered by Saudi Arabia. On the social prong, it should make sure that farmers get their due share in prosperity so that the disenchanted farmers do not quit the crop next year. The current trade setting is biased in favour of traders and exporters at the cost of growers. That needs to be balanced, if not reversed.

The government, to its credit, has taken the first step by pushing Pakistan Agriculture Services and Storage Corporation (Passco) into buying rice and ensuring an indicative price of Rs1,500 per 40kg. Being new to business of procuring rice, the corporation, however, is finding it hard to get hold of the market. It entered the market with a substantial finance of Rs30 billion, which gives it a control of 10 to 12 per cent of the crop.

But, it has so far not been able to play a role of even two per cent. The reason is bureaucratic: Punjab Agriculture Secretary Javed Iqbal wrote a letter to the Passco in September asking it to procure rice with 12 per cent moisture content – an almost impossible condition to be met by farmers.

The Passco, instead of using its own mind, blindly followed the recommendation, without thinking that mills purchase paddy with 25 per cent moisture content and dry it for milling purposes. The farmers hardly own dryers to meet the moisture condition set by provincial secretary and followed by Passco. It kept the Passco out of market for a crucial period of 15 days, witnessing price crash, which it was supposed to prevent, as helpless spectator. Ultimately, the agriculture secretary withdrew the letter in the first week of November and the Passco decided to purchase rice at double the paddy price from those mills which had procured paddy at the officially indicative rates. Such reckless individual experiments hurt farmers and farming beyond redemption and must be avoided in future to ensure fair trade.

Rice and wheat prices have almost been internationalised due to variety of reasons. The world prices now dictate domestic prices, and have brought dividends to Pakistan through increased acreage and yield.

If the current international rice price is something to go by, even the officially indicative paddy price of Rs1,500 per 40kg favours traders and exporters on two accounts – anatomy of rice making and devaluation. Currently, basmati export price hovers around Rs3,500 ($1,350 per ton) per 40kg.

Out of 40kg paddy, the millers get over 22kg of full head rice, two kg broken rice and five kilogramme of husk. Thus out of 80kg paddy worth Rs3,000, the millers and traders get over 44kg of full head rice along with other allied products, leaving an export and expenditures margin of around Rs600 per 40kg if price of all allied products are also taken into account.

The actual market paddy price, however, is around Rs1,250 to Rs1,300, which is suppressed by market cartelisation and comes at the cost of farmers. The government needs to correct this imbalance and make the market fairer for all stakeholders, above all the rice growers.

Last year, when the government fixed minimum export price (MEP) at $1,500 per 40kg, which came around Rs4,000 in domestic market, the paddy price was around Rs2,200 per 40kg. This year, the trend has been reversed, thanks to more wise traders. The domestic price was made to crash by almost 40 per cent against international price reduction of 10 to 12 per cent. The difference of 30 per cent has added to exporters’ margin.

Twenty-five to 30 per cent dip in rupee value against dollar has off set even that 10 to 12 per cent slide in international rice price. Rather, devaluation of rupee has added 15 to 18 per cent in exporters’ profit margin, which they were not ready to pass on to the farmers. Rather they have refused to maintain even last year’s paddy price.

The farmers maintain, with a measure of justification, that they have increased production by bringing more land under cultivation rather than any increase in per acre yield or a technical breakthrough.

If they are deprived of their rightful margin this year, the next year may not be as good as this year and the country would lose the chance of exploiting market niches as provided by Saudi offer this year.

The government should not forget that markets abuse and weak regulatory mechanisms always create winners and losers in free markets, especially in the Third World. Unfortunately, the organised sectors, like traders and exporters, often fall on winners’ side.

Weaker and unorganised sectors like farmers almost invariably end up becoming losers until the government intervenes as a balancer. If the government needs to cast itself in such a role in rice trade, it seems to be more propitious time.