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
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
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
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
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
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
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