Record-breaking year anticipated for rice exports in Pakistan, does it bode well?
Published on: December 6, 2023.
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Pakistani Rice Gains Favor in International Markets
In a significant shift, Pakistani rice, particularly the Basmati variety, is now preferred over Indian rice in international consumer markets. The Rice Exporters Association of Pakistan (REAP) revealed this during a media briefing at the National Press Club in Islamabad. The change is attributed to quality issues surrounding Indian rice in global markets, making Pakistani rice the preferred choice for its pest-free and high-quality attributes.
“Now they (Indian exporters) are trying to sell rice as Pakistani brands or variants like Basmati, as Pakistani rice varieties are preferred in the international market for being pest-free and of good quality,” said Chela Ram Kewlani, the current Chairman of REAP.
This shift presents a huge opportunity for Pakistan’s rice industry. With a bumper crop expected this year, REAP is confident that rice exports will surpass the record $3 billion, marking a positive development for the sector. However, it’s worth noting that despite being the second major export item, the rice sector currently receives no subsidy or support from the government.
Pakistan’s Advantage over India
The ban on rice exports imposed by the Indian government has played a crucial role in the preference for Pakistani rice. To combat high food inflation and rising prices, India banned all rice exports except for aromatic and high-end Basmati rice. As the largest exporter of rice, with a 40% market share, this ban creates a significant opportunity for Pakistan.
The ban resulted in a surge in prices of Pakistani non-basmati rice, making it more attractive in the global market. With Pakistan’s fresh crop set for harvest, growers have raised prices for the new crop due to the uncertain global situation. This has led to predictions of higher rice exports, potentially exceeding the previous range of $2 to $2.5 billion in recent years.
However, high rice exports come with a dilemma between food security and export. While the industry seeks increased protection and facilitation for exports, the people of Pakistan desire more affordable rice. This presents a challenge for the government in striking the right balance.
Supporting the Rice Industry
Kewlani emphasized the need for value addition in the rice industry through the production of by-products to generate more revenue. He highlighted the lack of industrial status granted to the rice sector, despite its contributions to the Export Development Fund (EDF). Increased technology and innovative methods are crucial for enhancing Pakistan’s $4.5 billion worth of rice export capability.
REAP officials predict that with adequate government support, rice exports could reach up to $4 billion in the next two to three years. However, tariffs in various countries pose challenges, necessitating agreements to facilitate trade.
Food Security vs. Dollars
A potential downside of increased non-basmati rice exports is a price hike in the local market, leading to food security concerns. Rice shortages can have far-reaching impacts on other food items and fuel prices, potentially causing panic buying. Current data shows significant inflation in rice prices, posing further challenges in managing food inflation levels.
Pakistan has the opportunity to capture a portion of the Indian market just this year. However, policy makers need to weigh the immediate pain of short-term inflation against the boost in exports. The government faces a dilemma of letting the free market dictate trade and risking food insecurity or intervening to protect foreign exchange reserves.
