LAHORE - The rice exporters have asked the government to bailout rice sector which is collapsing under double whammy of declining prices and harassment by the banks.

Rice Exporters Association of Pakistan newly-elected chairman Muhammad Shafique Ch said that the rice sector, which makes value addition of over 175pc, generating hundreds of thousands of jobs, its foreign exchange earnings of over $2 billion continue to suffer, hitting all stakeholders from growers to millers and exporters. The arrival of new crop has aggravated the situation as around five hundred thousand tons of rice from earlier crops couldn’t be sold or exported which is rotting in godowns.

Shafique Ch said that the new crop will further imbalance the market resulting in closure of hundreds of rice mills. The millers are unable to pay bank loans or clear outstanding amount to the farmers therefore State Bank has extended date of their repayments until June 2016 but banks continue to harass rice millers to recover Rs30.5 billion loans.

According to Reap chairman, Pakistan’s rice trade is facing severe challenges mainly due to rising costs of agricultural inputs and its export may decline sharply during this fiscal year. He said that the rice export, the second largest earner of the valuable foreign exchange, is continually being neglected by the federal government.

Shafique Ch said that owing to the high costs of agricultural inputs including fertiliser, electricity, water and lack of seeds development, Pakistan’s rice is uncompetitive in international market, especially the basmati varieties. Presently, Indian rice exporters are offering as low as the $300 per metric ton price for the basmati rice in the world market. As the prices of Indian rice are much lower than those in Pakistan, major importing countries and international buyers are switching to the Indian rice.

Shafique Ch said that under the current situation, exporters are not in a position to buy paddy from farmers because of a shortage of cash flow as their finance limit have already been choked. Therefore, the government should take some immediate measures to support them. The exporters are not in a position to return dues of export refinance facility instantly, because rice is still in millers’ stock and financial charges on these stocks are daily increasing the cost.

Shafique Ch said that the government should waive off the bank markup on the stock of last two years, besides refunding almost $40 million of 1 percent WHT which was deducted during the last two years period of loss. Moreover, WHT should also be reduced to 0.25 percent in future. The government should ask SBP to extend Export Refinance payback period and EF-25 based loans. He suggested the government to provide $200 per metric ton for basmati export, besides recognising rice sector as industry with zero rated GST and preferential electricity and gas supply. The government should also expedite pending GST and Income Tax refunds.

Reap chairman said that Prime Minister Nawaz Sharif farmers’ relief package is appreciable and it was better if the cash payment should be up to Rs10,000 instead of Rs5000 as per acre loss is around Rs50,000. It is a short-term solution and this meager amount will not compensate the huge loss of farmers. However, the solar tubewell plan of the government is good and can provide long-term relief to farmers if it is implemented properly. The proposed plan will lower input cost of farmers equalising exporters cost to the regional competitors, helping improve rice export. The solar tubewells will also save electricity which can be diverted to the industry in future, he added.

The Reap Chairman asked the government to run R&D under public-private partnership by formulating Basmati Rice Development Board for demand-driven research. The government may set up state of the art laboratory for rice testing at par with European standards labs.

Presently, super basmati seed is more than 20-year old, resultantly per acre yield has dropped to 30 maund from 50 maund, besides reducing Average Grain Length. “We demand that the Rice Research Institute should work on a project to reduce the input cost and increase the yield and quality of the Pakistani rice so that the cost of paddy will be reduced and the exporters can compete in the world market.”

“In addition, to protect the basmati rice export trade, Pakistan must focus on the markets of Iran and Saudi Arabia since these are the major importing countries of the basmati rice. A legal and official banking channels should be developed that can help start the official rice export to the neighboring country of Iran.”