LAHORE: The Indian government’s recent decision to eliminate the floor price for basmati rice exports and ease restrictions on non-basmati rice exports has triggered alarm among Pakistani rice exporters, who had previously benefited from India’s limitations.
This policy change is significant for Pakistan, which saw its annual rice export figures rise to approximately $3.9 billion in FY24, up from $2.15 billion in FY23, largely due to India’s earlier restrictions.
Effective from September 2024, India’s new policy could have substantial implications for Pakistan, its primary competitor in the global basmati rice market. Previously, India imposed a minimum export price (MEP) of $1,200 per tonne for basmati rice to stabilize local prices and ensure adequate domestic supply. However, due to declining international demand and pressure from exporters, India has revoked this price floor. Additionally, export restrictions on non-basmati rice, which were initially imposed to control domestic inflation, have been relaxed.
Industry experts warn that Pakistan, the world’s second-largest basmati rice exporter after India, may face significant challenges due to this shift. Pakistan has traditionally capitalized on its reputation for high-quality rice, particularly in the EU and Middle Eastern markets, where its products are renowned for their distinct aroma and superior quality. However, with India now free to export at more competitive prices, Pakistani exporters may need to lower their prices or risk losing market share.
“We have already written to the Trade Development Authority of Pakistan (TDAP) requesting a reduction in the MEP for basmati rice to around $900 per tonne, down from the current $1,300,” stated a spokesperson for the Rice Exporters Association of Pakistan (REAP). “It has been six months, and no decision has been made by the TDAP,” he added.
Pakistani exporters are concerned that maintaining current export levels will be challenging if India floods the market with cheaper basmati rice. Traditionally, Pakistani basmati has been priced 10-15% higher than its Indian counterpart due to higher production costs and export taxes.
“This is a strategic move to reclaim India’s dominance in key markets, which will put immense pricing pressure on Pakistani basmati rice,” remarked Fareed Ansari, an agricultural economist. “Pakistan has always relied on superior quality to command a premium price, but this latest move may force exporters to consider price reductions or explore new markets to remain competitive,” he added.
In 2022-23, India exported rice worth over $11 billion, with basmati rice accounting for $4.8 billion, while Pakistan’s total rice exports were $2.15 billion. In 2023-24, India’s basmati rice exports increased to $5.9 billion, while Pakistan’s total rice exports reached around $3.9 billion.
With India lifting its export restrictions, Pakistan’s non-basmati rice exports may also face challenges, particularly in African and Southeast Asian markets where both countries compete. However, some experts believe the situation may not be as dire as it seems.
“Pakistani basmati rice exports may not decline in volume, but we could see a reduction of up to $400 million in annual export revenues,” said Hamid Malik, Co-Founder of the Agriculture Policy Research Institute. He also noted that the Indian government’s decision could be politically motivated, especially with upcoming state elections in Haryana, where 70% of India’s rice is produced. “This decision might be reversed post-elections, but it’s crucial to recognize that Pakistan holds only about 20% of the global basmati trade, with a strong reputation for quality in key markets like the Gulf, EU, and America,” he explained.
Malik further pointed out that global rice prices are currently declining, and Indian farmers are struggling to sell their basmati at $950 per tonne, which contributed to the Indian government’s decision to remove the floor price. “In comparison, Pakistani basmati is still priced just under $1,000 per tonne,” he added.
Experts suggest that Pakistan should focus on marketing and innovation to promote its rice in premium markets. Competing with India solely on price will likely not suffice. Additionally, exploring new trade agreements or expanding existing ones could be beneficial.
