KARACHI: Falling prices of rice and other commodities in the aftermath of declining crude oil price, which plummeted from around $110 in July last year to below $40 per barrel currently, have left no room for Pakistan to go for higher foreign exchange earnings unless crude prices rebound once again.

Pakistan’s rice exports during 2009 touched $2.2 billion, after starting from a partly figure of $3 million only in 1989-90 when for the first time private sector was allowed to enter rice export business.

Besides the dynamics of the private sector, which played a major role in enhancing rice exports, the surge in crude oil prices at that time also had its full impact on higher foreign exchange earnings through rice exports. However, the situation has now taken a turn, with crude oil prices reeling below $40 per barrel.

According to official figures, rice exports in 2013-14 stood at $1.9bn but declined to $1.84bn during 2014-15. During 2013-14 the volume of rice exports stood at 3.361m tonnes out of which 733,000 tonnes ($846m) of basmati and 2.627m ($1.05bn) of non-basmati rice.

The volume of rice exports in 2014-15 increased to 3.720m tonnes but foreign exchange earnings remained low by $60m at $1.84bn due to falling rice prices on the world market.

Higher exports of non-basmati rice at 3.06m tonnes ($1.7bn) helped evade a major fall in export earnings from rice. Exports of basmati rice declined to 660,000 tonnes ($671m) in 2014-15.

Abdul Rahim Janoo, former chairman Rice Exporters Association of Pakistan (Reap) told Dawn that if the current falling trend goes on unchecked, it will badly affect export earnings.

“Rice prices have been rapidly going down for the last couple of years. The total impact of this fall is at around 90pc on basmati and around 35pc on non-basmati rice price,” he maintained.

The average unit price of basmati rice in 2008 was around $2,000 per tonne but now has come down to $995 to $1,150 per tonne. Similarly, non-basmati rice in 2011-12 was around $450-$500 per tonne and is now being quoted at around $330 per tonne.

“Pakistani rice exporters face two problems. There is global recession and then there is cheap Indian rice which is heavily subsided by their government,” he said.

Mr Janoo said the government should give some relief by removing 1pc withholding tax on rice export and arrange early payment of sales tax refunds.

“A huge amount of Rs250bn of refund payments of the entire export trade has been held back by the Federal Board of Revenue (FBR),” he added.

For any relief and concession, he said, the government would not have to take any burden as around Rs75bn are accumulated in the Export Development Fund (EDF), he said.

So far, not a single penny had been given to rice trade from this fund, he added.

Meanwhile, Faizan Ali Ghori, a rice exporter, said that Pakistan’s rice trade is in a crisis as no new variety or seed has been developed in the past three decades.

In 1985-86, when Pakistan introduced Super Basmati rice, it dominated the world basmati market. However, now India is dominating the world rice market after developing the new variety ‘Pusa 1121’ which has a grain length of 8.4mm against 7.2mm of Super Basmati.

He opined that Pakistani rice trade was faced with structural as well as research and development issues.

Without tackling these problems, the country cannot enhance its exportable surplus which is now only the way out for earning more foreign exchange from rice exports, he added.

Mr Ghori strongly suggested the government to check pre-harvesting and post-harvesting losses of rice growers along with introducing new variety of rice.

“This is the only way out for improving per acre yield of rice which is lowest in the region at around 35-40 maunds per acre against 60 maunds in other countries,” he added.

“For the past three years, paddy growers of basmati are faced with floods which damage their crop. Nala Degh, which carries water from India, is the main cause of flood. Either it has to be deepened or other necessary measure should be taken,” he said.

He cited old techniques of harvesting paddy and manual plantation as other reasons for low yield.

“All soft commodities internationally have experienced drastic fall in prices as demand from China slowed down while Europe continues to go through prolonged debt negotiations and public sector spending cuts,” he commented.

He further said economists and market analysts agree that the Super Cycle in commodities has come to an end. “Pakistan will have to look for a way out to keep its exports volume and earnings at a level where it could sustain and meet world commitments,” he said.

Pakistan harvests around 6.5m tonnes of rice annually, exports around 3.71m tonnes and consumes around 2.5-2.8m tonnes domestically.

Published in Dawn, December 13th, 2015