ISLAMABAD, Feb 16: Price of basmati rice has increased more than 25 per cent in domestic market in the last two months owing to low production and smuggling of the commodity to neighbouring countries, including Afghanistan and Iran.

“Prices will keep on increasing for basmati not only in Pakistan but also in India unless both increase production dramatically,” a senior official told Dawn on Friday.

The reason is that area under basmati production has come down by about 6-7 per cent as per government sources while actually the area has reduced much more due to basmati being replaced by sugarcane and cotton crops in many areas. Further, in October there were high wind situations when healthy paddy crop was ripe.

The basmati crop is basically seriously short this year due to lessening of area and lowering of agricultural yield. Domestic consumption has increased sizably in the shape of middle income group being more affluent and consuming the higher value basmati rice and now that one dish is allowed at weddings, a lot of basmati is being consumed.

According to the official the paddy prices started above normal and then skyrocketed. The farmer made good money. Millers were scrambling to buy paddy at any price to meet their internal stock procurement targets.

The cost of paddy has been higher to the growers for simple reason that all inputs have been more costly. Further to add to this situation, it is a fact that super basmati paddy seed was affected by the blight, a fungus like problem.

“We have been pointing this out to all concerned in the past years but no one listened. Now the crop is short also due to this reason. Farmers use last year's paddy as next year's seed without any treatment. Certified seed is used by very small number of farmers, a leading basmati farmer said.

Analysts said for basmati price the most important is the situation for supply versus demand both domestic as well as overseas and then look at export surplus in the shape of carryover old crop as well as new crop arrivals.

A leading basmati exporter said Iranians and Afghans to some extent have been actively buying new crop at higher prices to meet their requirements.