RICE exporters feel the government has let them down badly by ignoring their key concerns in the new budget despite a firm assurance of relief by the minister concerned.

Their dilemma stems from the rupee’s appreciation against dollar in recent months which was hailed as a sign of good health and a blessing for the country’s economy by all and sundry. But for rice tycoons, it came like a bolt from the blue, turning a happy event into a misfortune. The pre-appreciation orders booked at a time when a dollar was worth Rs108 now gave them earnings at the rate of Rs 98 a dollar – a difference of almost 10 per cent. The rupee appreciation was very rapid in a short period of 15 days and rice exporters were not mentally prepared for the “shock.”

Their key and urgent demand is compensation for the losses they have suffered. The Rice Exporters Association of Pakistan (REAP) has now come up with a figure of total losses by its members: Rs6 billion. How has this huge figure been worked out is not clear. Dozens of REAP members claim to have incurred losses of up to Rs50 million each. Most of these losses relate to the month of March and onwards.

REAP did welcome the dollar’s depreciation as a great event that would make the rupee stable against other currencies, but deplored the fact that it was not taken into confidence by the government while undertaking important policy measures. The association had presented a list of proposals to the finance minister, but none of them was taken into consideration in the budget.

A senior REAP vice-chairman Chela Ram pointed out at a recent press conference that they had pinned much hope on Commerce Minister Khurram Dastagir’s promise of providing compensation for the losses through budgetary measures, but Finance Minister Ishaq Dar made no such statement in his budget speech. In fact, he did not utter the word ‘rice’ in his long speech, although the rice export industry is second only to textiles in earning foreign exchange. There are multiple ways to compensate the exporters if the government did not want to do it in cash. It can provide subsidies for freight and on exports, and cut their utility bills.

He said if the government fails to provide relief, a large number of rice units will close down and Pakistan’s traditional customers would turn to other exporting countries. Explaining at the same time why the closure must be avoided, he said the demand for Pakistan’s long grain white rice has increased in the global market due to its high quality, despite its high rate of $400 per tonne, as compared to other rice exporting countries like India, Thailand and Vietnam. In fact, buyers are willing to pay an extra $30 to $40 because of its excellent quality.

Meanwhile, the country’s rice exports in the first 10 months (July 2013-April 2014) of this fiscal year, according to PBS data, decreased by 5pc (2.66 million tonnes), while those of the basmati variety fell by 7pc (514,541 tonnes) over the same period last year. However, earnings rose by 18pc ($1.87 billion), and those of basmati variety by 3pc ($545million) against last year’s figures. This means that the outflow of rice is continuing undisturbed despite non-compensation of the losses, and that there is no evidence of closure of rice units in protest against the government’s indifference.

In another development, rice exporters are now keen to resume trade with Mexico by resolving their differences with that country. They want the Trade Development Authority of Pakistan to take up their case with Mexico and work out a settlement. Mexico had banned rice exports from Pakistan in June 2013 after finding traces of Khapra beetle in some shipments. Its port authorities placed about 3,000 tonnes of Pakistani rice in quarantine, and later returned the whole quantity to Pakistan. The exporters had rejected the charges, but deplored the lack of interest by the commercial attaché of the Pakistan embassy there in taking up their case.

Since then, there has been no trade between the two countries. Prior to that incident, Mexico had imported around 16,000 tonnes of Pakistani rice in the first half of 2013 and 7,400 tonnes in 2012. Now, the exporters intend to take appropriate measures to prevent a repeat of such an incident. It takes about 70 days for Pakistani rice to reach Mexico.

In its latest report, the USDA Post says rice production in Pakistan is recovering from three years of successive floods. It has increased its estimates for milled rice production during the country’s Marketing Year 2013-14 (November-October) to 6.6 million tonnes, and put exports at a record 3.9 million tonnes, up about 8pc from an estimated 3.6 million tonnes exported in MY2012-13.

Published in Dawn, Economic & Business, June 16th, 2014