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Rice
Why Basmati is down
The share of Basmati rice in total
rice production in Pakistan has gone down from 74 percent in
2008 to 50 percent last season. The reason for this drop in
production has been, among other things, due to the illegal
adoption of the Indian variety, Pusa.
The world rice market is growing at 12.2 percent annually and
Pakistan’s share in this market is increasing at a rate of 18
percent, opens an SBP report titled “Basmati Rice Value Chain in
Pakistan.”
However, the report concedes that this is due to the demand for
our coarse rice in low-end markets, while the superior Basmati
breed continues to suffer.
As per the report, the share of Basmati rice in total rice
production in Pakistan has gone down from 74 percent in 2008 to
50 percent last season. The reason for this drop in production
has been, among other things, due to the illegal adoption of the
Indian variety, Pusa.
Small farmers are adopting the Pusa variety as it opens an
opportunity to grow a third crop between rice and wheat. This
variety gives a superior yield, consumes less water and grows in
a short duration.
However, this breed is illegal in Pakistan, and any concrete
reason for it being outlawed was absent from the report; an
industry source told BR Research the seed is not registered and
not approved by the KSK Rice Institute, saying they “don’t do
anything themselves and won’t let progress happen either.”
Indeed, a lack of research and development is a key reason for
the decline of Basmati exports, no matter who you talk to.
Although the size of the international Basmati market is not
mentioned in the report, an industry source said that it may be
around $6-6.8 billion (7-8 million tons @ $850/ton).
Two million tons of Basmati are grown annually in Pakistan, of
which around 0.6 million tons are exported. This number used to
be a lot higher, but lack of research and no incentives have
left the industry behind, while our favorite neighbor India has
stolen the show.
India has hybrid seeds which give exactly twice the yield of our
seeds.
Their inputs – water, electricity, fertilizer – are also heavily
subsidized by their government. An industry source added that
India flooding the market is the reason why international rice
prices are so low.
He added that India has snatched key Basmati markets from
Pakistan, such as Iran, and continues to penetrate the
international scene.
Domestically, an important issue highlighted in the report was
that of the middleman; around 80 percent of farmers sell their
produce to commission agents (Arthi) in the Mandi.
A profitability analysis revealed that the resource-poor farmer
who is dependent on Arthi for credit and input supply has a
profitability of Rs1539 per acre, while the mill-driven business
model (contract farming), where both small and large farms are
contracted by the mills, carries a much higher profitability of
Rs54012 per acre.
So, credit facilities need to be provided to the small farmers
so they aren’t exploited by middlemen, while contract farming
needs to be adopted on a larger scale.
On the production front, there are issues in terms of water
scarcity, outdated planting and harvesting methods, electricity
and gas outages, lack of technology, high cost of inputs and low
yields.
For an industry that is the second-highest exports of our
country, these are a lot of issues that need to be addressed!
November 2015
By BRecorder
Report
Source: Business
Recorder
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