X

South Asian Rice Exporters Face Off as India and Pakistan Lift Export Restrictions

South Asian Rice Exporters Face Off as India and Pakistan Lift Export Restrictions
Wednesday 02 October 2024 - 13:03
Zoom

The global rice market is witnessing a significant shift as India and Pakistan have recently lifted their respective export restrictions, igniting concerns over a potential pricing war. On October 1, 2024, global rice prices fell following these reciprocal policy changes aimed at resuming international rice sales.

India's government announced the removal of its ban on non-Basmati white rice exports, which had been in place for over a year. This decision was facilitated by an anticipated bumper harvest in 2024, which has bolstered state reserves for domestic consumption. The move came just a day after Pakistan declared the elimination of its minimum export price (MEP) for all rice varieties, a regulation that had been enforced since 2023. Under this policy, Basmati rice had a set price floor of $1,300 per metric tonne, while non-Basmati rice was pegged at $550.

Pakistan's decision to abolish the MEP was influenced by India's earlier action to remove its own MEP of $950 per metric tonne for Basmati rice in September. Both nations are the sole producers of Basmati rice, renowned for its distinctive flavor and aroma.

In a notification dated September 28, Jam Kamal Khan, Pakistan’s commerce minister, indicated that the government acted on requests from the Rice Exporters Association of Pakistan (REAP) to eliminate the MEP. He explained that this price floor was initially introduced in response to rising global prices and India's export bans on non-Basmati rice, which were followed by restrictions on Basmati exports in August 2023. These measures had previously positioned Pakistan as the primary exporter of Basmati rice, allowing it to command higher prices due to the MEP.

Khan noted that the recent decline in international rice prices and India's lifting of its export ban made the MEP an impediment for Pakistani exporters seeking to compete globally. He projected that this policy shift could enhance Pakistan's rice exports, potentially generating $5 billion in revenue during the current fiscal year. However, analysts caution that unlike last year, Pakistani rice will now face renewed competition from India.

India stands as the world’s largest rice exporter, accounting for nearly 40% of global trade and holding a dominant 65% market share in the Basmati sector. In contrast, Pakistan ranks as the fourth-largest exporter after Thailand and Vietnam, retaining 35% of the Basmati market.

In the fiscal year 2022-23, India generated over $11 billion from rice sales, with more than 4.5 million metric tonnes of Basmati alone contributing over $4.7 billion to this figure. However, in July 2023, rising inflation and concerns about potential production shortages due to the El Niño weather phenomenon prompted India to impose an export ban on non-Basmati rice, critical for its public distribution system, followed by curbs on Basmati exports a month later.

As Indian supplies dwindled, Pakistan emerged as an alternative supplier for various countries across the Gulf region, Africa, and Southeast Asia. From July 2023 to June 2024, Pakistan saw over a 60% increase in its rice export volume and a remarkable 78% rise in value, generating nearly $3.9 billion from almost six million metric tonnes of rice.

Despite these gains, concerns loom over the impact of India's re-entry into the international market. Chela Ram Kewlani, a former chairman of REAP, warns that without an MEP in place, Pakistani exporters may struggle to maintain their market share against Indian competitors who can offer lower prices due to their larger production capabilities.

Haseeb Khan, senior vice chairperson of REAP, expressed optimism about lifting the price cap as it would enable Pakistani exporters to expand into new markets such as Indonesia and the Philippines while maintaining existing relationships with buyers across various regions. He acknowledged that while competition with India is inevitable given its volume advantage, Pakistan's anticipated larger harvest could offset some challenges.

However, local farmers have voiced their discontent regarding the removal of the MEP. Mehmood Nawaz Shah, president of the Sindh Abadgar Board, a farmers’ organization, argued that eliminating this price floor could lead to lower prices and reduced revenues for growers. He emphasized that while exporters may benefit from increased sales volume due to competitive pricing, farmers might suffer financially.

Zahid Khwaja, another REAP founder and farmer from Lahore, echoed these sentiments by highlighting how India's domestic issues had previously created a market shortage that favored Pakistani exports. With India now back in play without restrictions hindering its exports, he cautioned that buyers might quickly revert to Indian suppliers rather than continuing their purchases from Pakistan.

As both nations navigate this complex landscape of agricultural trade amidst shifting policies and competitive pressures, it remains to be seen how these developments will reshape global rice markets and affect local economies reliant on this vital crop.

Add your comment

300 / Remaining characters 300
Publishing conditions : Do not insult the author, people, sanctuaries, attack religions or the divine, avoid racist incitement and insults

Comments (0)

The opinions expressed in the comments reflect only those of their authors and not of Lou.Press