Why Basmati is down

The share of Basmati rice in total rice production in Pakistan has gone down from 74 percent in 2008 to 50 percent last season. The reason for thisdrop in production has been, among other things, due to the illegal adoption of the Indian variety, Pusa.The world rice market is growing at 12.2 percent annually and Pakistan’s share in this market is increasing at a rate of 18 percent, opens an SBP report titled “Basmati Rice Value Chain in Pakistan.”However, the report concedes that this is due to thedemand for our coarse rice in low-end markets, while the superior Basmati breed continues to suffer.As per the report, the share of Basmati rice in total rice production in Pakistan has gone down from 74 percent in 2008 to 50 percent last season. The reason for this drop in production has been, among other things, due to the illegal adoption of the Indian variety, Pusa.Small farmers are adopting the Pusa variety as it opens an opportunity to grow a third crop between rice and wheat. This variety gives a superior yield, consumes less water and grows in a short duration.However, this breed is illegal in Pakistan, and any concrete reason for it being outlawed was absent from the report; an industry source told BR Research the seed is not registered and not approved by the KSK Rice Institute, saying they “don’t do anything themselves and won’t let progress happen either.”Indeed, a lack of research and development is a key reason for the decline of Basmati exports, no matter who you talk to.Although the size of the international Basmati market is not mentioned in the report, an industry source said that it may be around $6-6.8 billion (7-8 million tons @ $850/ton).Two million tons of Basmati are grown annually in Pakistan, of which around 0.6 million tons are exported. This number used to be a lot higher, but lack of research and no incentives have left the industry behind, while our favorite neighbor India has stolen the show.India has hybrid seeds which give exactly twice the yield of our seeds.Their inputs – water, electricity, fertilizer – are also heavily subsidized by their government. An industry source added that India flooding the market is the reason why international rice prices are so low.He added that India has snatched key Basmati markets from Pakistan, such as Iran, and continues to penetrate the international scene.Domestically, an important issue highlighted in the report was that of the middleman; around 80 percent of farmers sell their produce to commission agents (Arthi) in the Mandi.A profitability analysis revealed that the resource-poor farmer who is dependent on Arthi for credit and input supply has a profitability of Rs1539 per acre, while the mill-driven business model (contract farming), where both small and large farms are contracted by the mills, carries a much higher profitability of Rs54012 per acre.So, credit facilities need to be provided to the smallfarmers so they aren’t exploited by middlemen, while contract farming needs to be adopted on a larger scale.On the production front, there are issues in terms of water scarcity, outdated planting and harvesting methods, electricity and gas outages, lack of technology, high cost of inputs and low yields.For an industry that is the second-highest exports of our country, these are a lot of issues that need tobe addressed!November 2015By BRecorder ReportSource:Business Recorder