KARACHI, June 10: There are increasing incidents of bankruptcies among rice exporters who are entering into export contracts under Deferred Arrangements (DA) with their foreign buyers. As a result of this a huge amount is still stuck up as exporters are not receiving payments from the buyers.

Rice exporters have also approached the State Bank to look into the issue as the outstanding amount in foreign exchange against export proceeds of rice is increasing rapidly and it may have negative impact on the country’s total exports.

Exports of rice under the DA were not only resulting in non-remittance of foreign exchange but also creating cut-throat competition among exporters and encouraging ‘bad business’ practices, rice exporters observed.

The Rice Exporters Association of Pakistan (REAP) demanded of the State Bank to disallow export of rice on DA basis as nowhere in the world the practice was encouraged particularly when the country have big demand for its rice in the world market.

REAP chairman Haji Abdul Majid told Dawn that rice had become cash crop and due to its good quality there was huge demand for Pakistan rice both in coarse and Basmati rice, therefore, there was not such compulsion that exporters should enter into DA basis export deals.

He further said that the SBP extended refinance on rice exports and in case an exporter defaulted after not receiving payment against his export consignments this would deprive the SBP of foreign exchange and loss of refinance amount.

Sheikh Arshad Mehmood, a leading rice exporter, said that it was a proven fact that the country’s carpet industry which once thrived also became the victim of DA-based transactions of exports and ultimately it was totally destroyed. Therefore, he suggested that rice export contracts should strictly be made on Letter of Credits (LCs).

“In case an exporter opens an off-shore office of his own and enters into huge export contract on DA basis to get refinance from the State Bank and also take credit from the market and thereafter leaves the country who will be responsible for such an ugly scenario,” he cautioned.

Presently unhealthy competition was going on among rice exporters and prices of the produce in the domestic market were also influenced due to strong demand from exporters, he added. Mehmood said there was urgent need to stop rice exports under the DA.

After harvesting bumper rice crop of around 5.8 million tons the country has so far exported around 2.8 million tons of Irri-6 and about 0.824 million tons of Basmati rice. The Basmati variety is being sold in the world market in the range of $575 to $650 per ton and Irri-6 $236-$238 per ton.