The Pak Banker

Banks' lend­ing to rice mills dou­bles to Rs57b

- Business · State Bank of Pakistan · Pakistan · India · Abdul Razak · Kyrgyzstan · Pakistan Bureau of Statistics

Banks' lend­ing to rice pro­cess­ing mills more than dou­bled to Rs57 bil­lion in Jul-Dec 2020 from Rs26.5 bil­lion in Jul-Dec 2019, ac­cord­ing to the lat­est statis­tics re­leased by the State Bank of Pak­istan (SBP).

How­ever, this huge growth in lend­ing to rice millers came in the form of restruc­tur­ing of old loans un­der the spe­cial fi­nan­cial stim­u­lus pack­age an­nounced by the SBP in March 2020 to mit­i­gate the eco­nomic fall­out of Covid-19 pandemic.

That's why de­spite this mas­sive lend­ing - and that too at low in­ter­est rates - rice ex­ports did not rise. In fact, Pak­istan ex­ported a lit­tle be­low 1.825 mil­lion tonnes of Bas­mati and non-Bas­mati rice in Jul-Dec 2020, against ex­ports of 2.083 mil­lion tonnes in the same pe­riod of 2019, ac­cord­ing to the Pak­istan Bu­reau of Statis­tics (PBS).

Va­ri­ety-wise, ex­ports of Bas­mati showed a much sharper de­cline, from 428,590 tonnes in Jul-Dec 2019 to 265,672 tonnes in Jul-Dec 2020. Ex­ports of nonBas­mati rice also fell from about 1.61 mil­lion tonnes to 1.559 mil­lion tonnes. In terms of value, to­tal rice ex­port earn­ings slipped from $1.033 bil­lion to $963.4 mil­lion, the lat­est PBS data shows.

So, what ac­tu­ally hap­pened? And, is there any chance for Pak­istan to re­coup the ex­port losses and boost its an­nual rice ex­port earn­ings at the end of cur­rent fis­cal year in June? A break­down of ex­port data re­veals that ex­port earn­ings went down due to lower earn­ings from Bas­mati rice.

The de­cline in Bas­mati rice ex­ports was so sharp (down from $381 mil­lion in Jul-Dec 2019 to $263 mil­lion in Jul-Dec 2020) that it even di­luted a rise (from $652 mil­lion to $700.7 mil­lion) in ex­port earn­ings from nonBas­mati types of rice. So, the real is­sue is with the Bas­mati rice.

Rice ex­porters say from now on­wards Bas­mati ex­ports will likely in­crease as they ear­lier suf­fered a fall in ship­ments when In­dia mis­chie­vously ap­plied for a ge­o­graph­i­cal in­di­ca­tion (GI) tag for what it had pre­sented to the world as Bas­mati rice. Ex­ports of Pak­istani

Bas­mati were be­ing blocked by some Euro­pean coun­tries due to In­dian lob­by­ing on this ground.

On Jan 26, 2021, Ad­viser to Prime Min­is­ter on Com­merce Ab­dul Razak Da­wood an­nounced that Pak­istan had suc­cess­fully got its GI tag for Bas­mati. This means Pak­istan can now ex­port its Bas­mati rice more freely to those Euro­pean coun­tries and its Bas­mati ship­ments to Euro­pean coun­tries will likely in­crease.

But this alone can­not help boost Bas­mati rice earn­ings. Pak­istan also needs to en­sure that Bas­mati rice fetches a higher av­er­age ex­port price.

Dur­ing Jul-Dec 2020, the av­er­age ex­port price for Pak­istani Bas­mati stood at $990 per tonne. Di­vide it by one thou­sand and you get an av­er­age price of 99 cents per kg. It is hu­mil­i­at­ingly low. Are we ex­port­ing Bas­mati rice be­low Rs160 per kg? (One US dol­lar cur­rently stands at less than Rs160).

Un­be­liev­able! In lo­cal mar­kets, even the most or­di­nary va­ri­eties of Bas­mati are sell­ing for Rs200 per kg and above. It doesn't make sense. Ei­ther ex­porters are un­der­stat­ing the ac­tual price of Bas­mati be­ing ex­ported or they are ex­port­ing Bas­mati at throw­away prices just to keep their share in global rice mar­kets.

In ei­ther case, the Min­istry of Com­merce must in­ves­ti­gate the mat­ter. If un­der­state­ment of ex­port prices is es­tab­lished in case of some ex­porters, they must be taken to task.

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