In May 2022, India banned wheat exports and imposed restrictions on sugar exports. Recently, it has also banned exports of broken rice and levied 20 per cent new duties on semi-milled and milled rice (excluding parboiled and basmati varieties).

These measures aim to manage “national food security” by augmenting stocks and calming food inflation. Since India is the largest rice exporter, accounting for almost 40pc of the global grain trade, the export restrictions would escalate international inflationary pressures and worsen food supply issues.

Additional export duties would make Indian rice exports uncompetitive in the international market, encouraging buyers to shift to its competitors like Vietnam, Thailand, and Pakistan, which are among the top five rice exporters. Yet they won’t be able, even collectively, to bridge the export gap that India will create.

Pakistan produces around 8.9 million tonnes of rice annually, whereas only 4m tonnes is consumed in the country, leaving the rest for export. Therefore, India’s ban offers a lucrative opportunity for Pakistan to expand its rice exports and fetch better prices.

Allowing the export of basmati rice but restricting other varieties will earn revenue and maintain food supplies

However, Pakistan is facing destruction by massive floods, which have washed away millions of acres of standing rice crops in Sindh and Punjab.

Initially, 9m tonne production was expected for the 2022 crop. However, due to a shortage of canal water during the rice planting season, the estimations were revised to 8.6m tonnes. Out of this, Sindh province estimated production at 2.3m tonnes, mainly from its rice zone, which is the worst hit by the floods.

A rapid assessment of crop losses in Sindh was recently conducted by the International Centre for Integrated Mountain Development and Pakistan Agricultural Research Council (PARC). Using an approach based on satellite imagery and measuring district and tehsil level damage intensity indicated crop losses of almost 80pc of the rice acreage.

Production losses are estimated to be 1.8m to 1.9m tonnes. In addition to standing crops, the flood has destroyed the stocks lying in the houses for personal consumption as well as for the next crop seed. Total crop losses are roughly estimated at around 2.2m tonnes, most of which are non-Basmati (coarse) varieties.

Many think that Pakistan is heading towards a real food security challenge, and they are proponents of imposing restrictions on rice exports like India. Expected shortage of wheat in the country, rice crop loss caused by the flood, derailing wheat planting season due to stagnation of flood water in fields, significant loss of livestock in flood-affected areas, greater reliance of poor and lower-middle class on wheat-based and rice-based products in the diet due to lack of affordability for meat, milk and fruit, low production of staple food across the world due to climate change, and disruption of global food supply chains, are some of the arguments in favour of exports restriction.

These factors may raise the risk of continued food shortfalls and price spikes in the coming months. On the flip side, farmers and rice exporters favour exports for many reasons.

First, Pakistan’s rice production will hopefully stand at around 6.4m tonnes despite flood losses. After putting aside local consumption, a 2.4m tonne exportable surplus will be available in the country.

Second, rice is not a principal grain consumed in Pakistan. Per capita rice consumption in Pakistan stands at 18kg, whereas Bangladesh and India consume around 190kg and 78kg per capita, respectively. Therefore, it can be asserted that rice is not as sensitive as wheat, if looked at from a food security perspective.

Third, the share of rice in Pakistan’s consumer price index (CPI) is quite small — in the food CPI basket, its weightage is just around 3.8pc. So higher rice prices would not significantly impact consumers as it does in the case of wheat.

Fourth, penetration in export markets takes time, money, and effort. Pakistan may lose valuable markets/buyers in case exports restriction are imposed. In particular, basmati varieties are often sold under brand names, and any supply disruption may adversely affect brands’ equity.

Fifth, over and above all that, basmati rice is grown mostly in districts that have not been affected by the floods. Thus the basmati crop is largely intact. Harvesting of basmati varieties is in progress in Punjab, and due to favourable weather conditions, the yield is 10-20pc higher than the previous year.

The government is facing conflicting priorities. On the one hand, the government wants to earn maximum foreign exchange through exports, while ensuring national food security and quell inflation. Moreover, balancing the competing interests of its farmers and consumers is also a hard task.

If rice export is allowed without any restriction, excessive depreciation of the rupee may render Pakistan’s rice more competitive globally, which is likely to result in excessive export of rice, causing a shortage in the local market.

Therefore, Pakistan may go for a cautious policy that allows the unabated export of Basmati rice, hoping to meet 750,000 tonnes of export, but restricts exports of non-basmati (coarse) rice, capping it at 2m tonnes.

Mr Wattoo is a farmer and consultant in the social sector.

Ms Hasan is a political economist and graduate of the London School of Economics and Political Science.

Published in Dawn, The Business and Finance Weekly, October 11th, 2022

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