ISLAMABAD, May 2: The government is considering allowing Passco to enter into a deal with the Government Trading Corporation (GTC) of Iran for export of Irri-9 and basmati at a preferential duty, Dawn has learnt.

Though with the abolishing of Rice Export Corporation of Pakistan (RECP), the private sector had already crossed $1 billion rice export mark last year, the government still wants to encourage yet another government department to enter into a business which earlier bore no fruits.

Technically, Pakistan Agriculture Storage and Supplies Corporation (Passco) can only be used for rice purchase if the private sector is not able to procure various rice varieties at the support price.

The current situation is that rice is being sold domestically at much higher rate than the support price. The proposed move will discourage private sector in the rice export.

Pakistan’s commercial counsellor in Tehran has sent a letter to the agriculture ministry to examine the issue whether it would be possible for Passco to enter into business of export of rice with the GTC.

According to the letter, the GTC will import rice at a rate of four per cent customs duty as against the private sector import duty of around 150 per cent.

The GTC feels more easy and safe while dealing with a government export body as heavy transactions are involved.

GTC chairman visited Pakistan in December last and offered to purchase 400,000 metric tons of rice. Of this, an agreement regarding 20,000 metric tons of rice has so far been signed with the GTC, the letter said.

The agriculture ministry, meanwhile, has sent a letter to the chairman of the Rice Exporters Association (Reap) seeking views and comments of the stakeholders for allowing Passco to export rice to Iran.

The letter seeks stakeholders’ views regarding possibility of rice export to Iran on their terms and conditions from the private sector.

While the letter from the agriculture ministry to the Reap chairman inquires about terms and conditions for export of rice to the GTC, that is acceptable to private sector exporters, the actual letter from Pakistan embassy to Minfal asks a completely different question of examining the issue of allowing Passco to export rice to Iran.

A leading rice exporter, requesting not to be named, told Dawn that the private sector must oppose any and all moves that attempt to revive RECP in the shape of Passco or any other body.

"We, therefore, should not agree to the sale of rice to the GTC Iran through any government body, such as Passco, TCP or anyone else. Only private sector should remain in the rice export business," he stressed.

According to the exporter, a lot of rice is reportedly being smuggled to Iran, causing a loss to the national exchequer.

Some rice is exported through under-invoicing to avoid high duty, the exporter said.

Therefore, domestically sold rice is sent to Iran through informal sector, bypassing import duties; therefore, domestic buyers for Iran are able to afford paying higher rates in Pakistan.

The result is that Super Basmati that started at a price of about Rs1,050 per 40 kg for crop 2005-06 is currently selling at Rs1,600 to 1,650 per 40 kg for 2006-07 crop, a phenomenal price increase of about 57 per cent.

The present price of 2005-06 crop that is now old crop is reported around Rs1,750 to Rs1,900 per 40 kg, depending on its quality. That means an increase of about 80 per cent from new crop to old crop 2005-6 rice, added the exporter.