Threat to basmati rice export

The Rice Exporters Association of Pakistan announced crossing $2 billion mark in foreign sales. Its officials listed the seasonal problems that confronted the association and the efforts it made to defeat them to reach the benchmark.

They are right, but up to a point, when they say that debilitating energy crisis and discouraging law and order situation threatened export process this year like never before. It is also true that India entered the rice market with a huge surplus and 20 per cent devaluation of its rupee, giving it almost unbeatable comparative advantage against Pakistani exporters. To make the competition even tougher, India withdrew the minimum export price (MEP).

Other competitors like Vietnam and Myanmar posed stiff competitive challenges. The State Bank of Pakistan (SBP) also quietly honoured sanctions against Iran, resulting in drastic drop in basmati exports to it. But the exporters still maintained their share and were able to achieve the mark.

But, primarily Pakistan’s rice export is turning out to be a failure, especially when taken in the backdrop of its projected potential. The exports are stagnant for the last many years, both in quantitative and value terms – hovering around four million tons in quantity and $2 billion in worth. Are both these figures satisfactory? Certainly not! Especially when taken in the backdrop of Indian success in doubling its export of basmati.

Pakistan’s rice exports have developed some permanent features (some call them deterrents) that include: poor quality and poorer international prices, failure to develop brand and retail market share and permanently and dangerously, narrow base of exporters. For the last few years, however, a new, and perhaps the most lethal, factor has crept in the export process — increasing uncertain future of basmati variety.

The entire rice export regime of the country has traditionally been based in this variety, which gave it a natural competitive edge in world market. Certain geographical attributes made it the most ‘sought after variety’ and the world paid premium for its natural traits – taste and aroma.

Of late, this main pillar of rice export, however, has come under threat because of short-term greed of a small bunch of exporters and traders. They regularly manipulate market to deprive everyone of his share of profit. Precisely for this reason, the variety is increasingly loosing its economic sheen — particularly for farmers. With the loss of commercial attraction, farmers are increasingly abandoning the crop.

Last four years acreage reflects farmers’ loss of interest. In 2008-09, the variety was sown on 3.82 million acres. In 2009-10, area dropped to 3.49 million acres in Punjab, where the variety can be sown. Next year, it came down to 3.29 million acres, and last year it was reduced to 2.77 million acres. Where would this decline stop?

With loss of area, decline in production is only natural – especially when there has neither been any breakthrough in seed nor in production process. In 2008-09, Punjab produced 2.6 million tons of basmati. In 2009-10, it came down to 2.47 million tons.

Next year, it was 2.36 million tons which dropped to 1.88 million tons last year. Its share in export dropped from 1.2 million tons to just over 900,000 tons during the same period.

With basmati on a decline, would Pakistan be able to sustain its rice export? Most probably it would not. Without basmati, it will have to compete in hybrid varieties where it simply stands no chance for a number of reasons. Far East countries, like China, which produce those varieties, have already leapt generations ahead — both in technology and seeds varieties. They have gone into super hybrid regimes and getting yield of over 200 maunds per acre, against a paltry 70 maunds in Pakistan. With that kind of yield differential, would Pakistan ever be able to maintain any competitive advantage in the world market?

Apart from financial dimension, the varieties like basmati, which could only be produced in certain geographical environment, are considered common human heritage. No country is allowed to damage them, deliberately or though neglect. Pakistan, on the one hand, is fighting a legal battle with India, insisting that basmati could only be produced in 15 districts of central Punjab due to particular geographical signatures. On the other hand, it is allowing influential domestic players to manipulate the entire variety out of existence.

The world sensitivity to such heritage is reflected in the regime of patents under the World Trade Organisation (WTO). Such patents save local varieties in each and every part of the globe because they bring diversity of taste, intellect and employment to million of people. Every host nation is allowed to charge a premium on such varieties. Instead of building on this natural advantage, Pakistan seems to be bent upon loosing it – that too for greed of the few.

The country cannot shift to hybrid regime for two reasons: domestic consumption pattern and price differential between the two. Pakistanis are a basmati consuming nation. The hybrid varieties even cause social stigma.. Thus, a part of acreage would always be spared for basmati. Why let a variety slip out of hands when it is matter of social, dietary and economic realities?
Price differential between basmati and hybrid in international market would also provide a compulsion for Pakistan to save this variety. It is sold in world market at almost three-time higher price than other hybrids. All these points make basmati integral part of social and economic life. This natural advantage needs tending, not strangulation.


Courtesy: The DAWN