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Need to set minimum rice export price              
By Ahmad Fraz Khan

May 30, 2011: RICE export figures for the first 10 months of the current fiscal year do not appear as impressive when seen in the context of higher international price as compared to last year.

According to these figures, 3.3 million tons of rice have been exported, earning $2.5 billion. Though the picture is better than last year`s, when it exported 4.3 million tons to earn $2.2 billion, but it, by no means, can be termed satisfactory.

Pakistani exporters, it seems, are either dumping rice in international market or under-invoicing exports to make windfall. But for the last three years, it has refused to slap the minimum export price (MEP) despite continuous demand from growers and in the light of Indian experience.

The case of under-invoicing gets strengthened given huge increase in remittance in last few months. Major portion of increase has emanated from the Middle East, especially the Gulf region. It is also the region where 70 per cent of rice exports go.

The Middle East, which is affected by the turmoil, is not the one known for housing Pakistanis. Thus, there seems to be some measure of justification in the allegations that it is rice under-invoicing money that is finding its way back to in shape of remittances from the Middle East and the Gulf.

In order to preempt such possibilities, the federal government, after properly assessing the world market, must maintain minimum export price. The federal government kept MEP for four months only during 2008. In the absence of MEP, the exporters tend to dump rice abroad at cheaper rates.

In order to feed cheap exports, they engineer domestic price crash and hurt farmers. The Indian experience shows that MEP helps. It has been keeping MEP for the last three years, and seen its exports doubling from 1.2 million tons to 2.4 million tons. During the same period, Pakistan also saw its exports increasing but value dipping, because the government stopped bothering about the value of export. The MEP can certainly be adjusted to international market trend.

On the second plank, the federal government also needs to break the monopoly of the Rice Exporters Association of Pakistan (Reap) to make exports more competitive. The Reap was formed in late 1990s and, initially, it argued that no one was ready to join it because every one was free to export. Thus, it was given monopoly right. During the last decade, its role has left much to be desired because it, like other organisations where profiteers are in-charge, seems more focused on profits, rather than development of rice exports.
 

 

The country has sufficient surplus rice to export, and the Reap does not clear the entire glut. Why keep an exclusive dependence on it, when it cannot deliver. It is time to open up exports to others and make the quality control regime more stringent.

The Reap also needs to be held accountable on two other counts; brand development and retail marketing. For the last over a decade of its life, it, neither collectively nor individually, has moved on the brand development. In the absence of any such effort, Pakistani rice is being used to strengthen brand of other countries, especially Indian. Pakistan is fighting a legal battle with India about geographical indications of basmati rice, and exporters are using Pakistan rice to reinforce Indian brands.

In the absence of a brand, rice exports would remain hobbled to their current level. The absence has also become counter productive. It hurts everyone involved in the rice export and only ensures meagre payments to farmers, small profit margin for exporters and even smaller foreign exchange for the country.

 

Brand development is an expensive exercise given the massive marketing campaigns that it needs, but the exporters must realise that once established, it would permanently benefit everyone – the country, the farmers and the exporters. It is an exercise worth undertaken despite huge cost and effort.

Similarly, the Reap also needs to answer why it has not gone into retail marketing, where big money lies. It may easily double the price of export if it goes into retail. Presently, it is selling rice at around $1 per kilogramme. The market players say that retail price can go up to $5 per kilogramme. Some portion of this money will to go to packaging and the middlemen, but still it is 400 per cent increase in prices.

That is the area, which remains totally untouched by exporters. The Reap needs to clarify its position because it has been enjoying monopoly rights over rice exports, which no other organisation enjoys over any other commodity.

Rice is too important a crop to be left to few hands. Apart from its export value, the sheer consumption of water entitles to extra national care. It roughly uses 17 million acre feet of water, which agriculture economists` claims costs around $34 billion for any economy of the world. Only for this reason, if nothing else, the country needs to look at the rice anatomy afresh and force the exporters to capitalise on a commodity to the maximum that consumes so much precious national resource.

 

Courtesy: The DAWN

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