Pakistan Will Falter in Export of Rice Opportunity Without Support from Policy

Pakistan Will Falter in Export of Rice Opportunity Without Support from Policy

Pakistan’s rice exports dropped 17.3 percent year-to-date (FY24), reaching $233 Million versus an annual export total of $283 Million during FY23.

Exports of basmati rice were up 8.2 percent. In comparison, those belonging to categories accounting for 80 percent of all exported rice exports (IRRI-6 and IRRI-9 varieties and Broken types) saw their share decline to 28 percent.

This decrease may be attributable to lower stocks of different varieties and the harvest season for International Rice Research Institute varieties not commencing until April, so although an increase may be anticipated, obstacles are preventing China from realizing its full potential when selling $365 billion globally in rice sales.

Exports of rice decreased 14.47 percentage points from FY22 to $2.1 billion, and Basmati exports showed increases between 6.3-17.5 percent, respectively.

Although many expected the decrease, as last year’s devastating floods reduced production by 21 percent, expectations are very positive. This year’s show is predicted to increase by 9 million tons due to various other elements.

India, one of the major exporters, banned non-Basmati varieties from being exported, placed a 20 percent tax on parboiled exports, and established an upper threshold price for each ton of Basmati variety exports of $1200 per ton.

Pakistan can use this opportunity to increase its presence on the international rice market and expand exports, but will we have enough tools to take full advantage of it?

Based on discussions with an exporter dealing directly with customers in larger markets like the United States, cargo insurance requirements could exceed $2 million, whicwhich only a few businesses in that market can afford. To limit risk exposure and limit margin erosion, most exporters attempt to work through resellers located in hubs like the United Arab Emirates (UAE), which not only decreases margins but can bring added issues into play as well.

Nabeel Yusuf, agricultural tech director and owner of Hathor Trading LLC, told ProPakistani that clearance issues had forced him to turn away three clients due to export clearance delays.

“We started the rice trade to assist farmers after realizing that providing all value chain components would be the only effective means of assisting,” stated Yusuf when speaking to ProPakistani.

He noted that though specific challenges might have been justified from a regulatory perspective given FATF guidelines, business considerations justify requests such as credit verification. He suggested that since no country other than Pakistan and India could produce this variety of rice on earth, why shouldn’t the government ease certain regulatory hurdles during periods like India’s ban?

He noted how Pakistan produced an abundance of potatoes and tomatoes over recent years, forcing farmers to dump or plow them back into fields due to market prices not justifying harvest costs. According to him, one solution could be reaching out to international and domestic buyers at reduced rates; however, they could miss out if Pakistan lacks adequate policy support for this market.

India has for some time outshone Pakistan in the international rice market due to lower production costs and superior value chains. Before Pakistan instituted its ban, India had nearly 20% duties on the export of non-basmati rice; prices on global markets were significantly lower than their Pakistani equivalent.

Pakistan lacks an effective policymaking process responsive to rapidly shifting market trends due to too many moving parts within its system; actions or reactions often produce minimal repercussions.

Given India’s current ban and rising international rice prices, efforts could have been taken to increase participation by buyers and exporters; unfortunately, there hasn’t been any advancement.

According to an estimated 2020 Report issued by the Trade Development Authority of Pakistan (TDAP), the rice industry typically takes 16 business days. It involves 18 documents needed by those involved to meet legal and commercial requirements for export business procedures and transport Basmati rice from an exporter warehouse to its ship, along with eventual discharge ports at its final destination country.

Periods typically span five days: three for transport to ports and loading onto vessels, two days loading onto ships, then an entire day spent creating export documents, obtaining phyto-certification certification and cargo insurance – followed by another 10 hours arranging empty container deliveries.

Additionally, these numbers represent average figures from 2020; currently, more realistic numbers may lie around 20-21 based on our discussions with exporters who claim that expeditious procedures allow them to get around obstacles quickly but leave gaps that discourage new competitors from developing innovative strategies for the market.

Considerations should also be given to conditions for exporters already operating within their industry since entry barriers tend to be considerably greater for newcomers.

If we wish to remain competitive with India, it will require new thinking with innovative marketing and branding ideas for our products. To reduce production costs over the long-term goal of overhauling the agriculture industry will help. At least increasing focus on marketing and branding improvements may help in this effort.

“To start a business successfully in Pakistani rice exporter Amit Kumar recommends consulting Rice Exporter Association Pakistan (REAP) and chambers of commerce to become members. Membership for both organizations takes approximately 7-10 days,” said ProPakistani when speaking to him directly about this matter.

He noted that, in specific steps, such as packaging materials procurement, certain exporters with capital may purchase large amounts to speed up their processes – though delays still apply for all exporters despite these measures. He further mentioned how export markets had nearly come crashing due to currency devaluations due to dollar exchange rate changes as an additional problem.

Kumar noted that Pakistani rice prices had skyrocketed over recent years, prompting exporters to purchase Indian grain and package it under Pakistani brands for packaging purposes. Kumar stressed the need for improved information regarding essential commodity quantities available and export potential so long-term decisions could be taken without shutting off exports or importing them later, such as with rice exports.

Although we must evaluate India’s ban to find sustainable solutions since this event only occurs once annually and could be revised in mid-October, we fail to capitalize on it and seize this opportunity. Meanwhile, India seems to have gained more significant economic profit by charging approximately $100 more per ton on government-to-government contracts by offering exceptions due to knowing how best to capitalize on every situation.

Mexico recently contacted Pakistan and conducted numerous studies and tests before lifting its ban on Pakistan’s rice imports, which was put in place back in 2013. Russian marketplaces have also opened for Pakistan, leading REAP to predict its annual rice exports could surpass $3 billion with these changes taking effect.

The report also stated that the Association provided the government with an outline for increasing rice exports to $5 billion over four years; implementation remains to be seen, emphasizing the necessity of policy boards that monitor supply and demand to make informed decisions regarding commodity export.

Pakistan recently introduced an initiative called Pakistan Single Window (PSW), which brings exporters, customs officials, banks, and clearing authorities under one umbrella. While Mexico, Russia, and some other markets provide insight into what could help facilitate more trade between us, our role must remain unchanged to streamline these processes and barriers.

Establish a one-stop operation for old and new exporters to bring new ideas and enthusiasm to discussions about exporting. Now is also an opportune moment to remove barriers to their growth to realize maximum benefits from this opportunity. However, no long-term or short-term policies have been made regarding this matter.