|
Surging rice price, domestic
consumers and exports
By Faizan Ali Ghori
 RICE
prices continue to rise with non-basmati varieties
witnessing the highest increase. The situation makes the
task of the new government extremely difficult in
controlling food inflation. As the common man continues to
be burdened by high fuel to food costs, curbs on rice export
may be seen as the easiest option to improve supply and
control the prices.
But, on the other hand, the poor farmers from the
rice-growing belts, would be the worst affected by any rice
export curb or ban. Any such step might bring short-term
relief but will hurt the long-term growth prospects of the
agriculture sector.
Moreover, it will be resented by 70 per cent of the rural
population which is directly or indirectly depends on its
livelihood to agriculture. Farmers already are frustrated by
low procurement price of wheat, now fixed at Rs625 per 40kg.
The farmers’ associations across Punjab and Sindh have
disapproved the latest procurement price which is far below
the international market rates, while prices of inputs (DAP
and urea) are closely linked with global prices.
With the wheat price standoff with farmers, curb on rice
exports would simply add insult to injury as prices paid to
farmers for rice paddy will definitely fall.Further, it can
be argued that the rural population is not affected by
rising food prices as it keeps part of the produce for its
their own yearly consumption..
But still, what is the solution for the high food bill of
the urbanites? Is there any possibility of stabilising food
prices especially prices of rice? The answer lies in a
multi-faceted approach of short-term, medium-term and
long-term measures that will assure stability of rice prices
and growth in foreign exchange earnings through rice export.
Short-term measures: Like wheat, a lot of our rice finds its
way to Afghanistan through our porous borders. This rice
smuggled across the border through semi-barter trading goes
undocumented and does not bring any foreign exchange or any
income tax earnings. The first priority of the government
should be to ensure that rice is not smuggled into
Afghanistan; instead it is exported via official channels.
The table shows that rice production dipped by only two per
cent last year. But because of increased prices, our volume
of exports fell by 15.2 per cent. Somehow, our local
consumption increased by a staggering 24.2 per cent. These
large swings in local consumption are not increases in
domestic consumption but represent cross-border smuggling.
The notion that local prices of rice have increased due to
increased exports is not right. If smuggling is effectively
checked, the domestic availability will increase and local
prices will stabilise.
Financing offered to industries/businesses other than rice
is mis-used for speculative rice buying.. Many businesses
that had nothing to do with rice, for instance textiles and
fertiliser dealers, were buying rice with banking facilities
extended to them for other purposes. The State Bank should
ensure that bank credit was not directed towards speculative
trading.
Within the rice value chain, the SBP should implement
specific lending policies for rice huskers, rice brokers,
and rice middle-men that ensure a smooth rice trade without
any hoarding/price manipulation by middlemen. For this
purpose, margin for pledge should be increased and it should
be required that banking facilities are revolved/settled
within 90 days by rice huskers and middlemen.
Medium-term measures: According to International Rice
Research Institute (IRRI): “Post-harvest grain losses across
all Asian countries have been estimated at 10–15 per cent
and, when combined with the loss of quality, the potential
loss in value is between 25–50 per cent”. The same is the
case in Pakistan as a significant portion of the rice crop
is destroyed and wasted due to improper handling and lack of
storage facilities and logistics.
If this wastage is reduced, the rice production will
increase and prices stabilised. The widespread use of
automatic harvesters makes the process of paddy harvesting
quicker, but at the same time the moisture content is much
higher than in the past. Paddy with moisture levels of over
20 – 25 per cent is very likely to develop fungus and
aflatoxin if not dried quickly and properly.
Unfortunately rice dryers (a common sight in most
rice-growing nations) are rarely seen in Pakistan as most
husking units employ the traditional sun-drying method which
leaves rice at the mercy of rain and fog during the period
of harvest.
Additionally, after paddy is dried, it is stacked in jute
bags out in the open due to limited warehousing instead of
being stored in grain silos. If the government assists rice
farmers in acquiring husking units, it will improve rice
handling infra-structure on favourable terms, and will go a
long way in reducing wastage and stabilising prices in the
medium-term.
Long-term measures: As part of the overall agricultural
strategy, the future of rice cultivation should also be
carefully chalked out. Like other agricultural produce,
yield of rice per hectare is also below that of regional
countries -- India, Thailand, Vietnam and China. Effort
needs to be made through rice research institutions to
introduce high-yielding varieties. There is also need to
bring more land under cultivation by improving water and
irrigation management systems. And finally there is need to
increase research and technical expertise of farmers with
reference to rice cultivation.
With a broad picture in mind, the government may be
successful in stabilising rice prices and increasing foreign
exchange earnings instead of a knee-jerk reaction of curbing
rice exports. To quote experts: “Banning exports does
nothing to encourage farmers to increase supply or improve
productivity”. A ban only exacerbates the price spiral
problems. It does not solve it.
The writer is Director of Matco Rice Processing (Pvt)
Limited.
Courtesy:
The DAWN
|
Pakissan.com;
|
