Budget Facilitate $5 Billion Worth of Rice Exports?
In the recently announced Rs. 14.4 trillion budget for agriculture initiatives, a significant measure that stood out was the blanket duty exemption on agriculture machinery. This exemption includes essential equipment such as harvesters, seed planters, trans-planters, and most importantly, dryers for agriculture products. By easing the export process for these dryers, the government has the potential to add a substantial $5 billion to annual exports.
However, the current scenario reveals that only 1 percent of small rice mills out of the total 800-900 in Sindh province possess dryers. The primary reason behind this scarcity is the heavy cost associated with custom duties and high-interest loans. Moreover, the import restrictions imposed on agricultural machinery further complicate the situation. This raises a fundamental question: why are dryers so crucial?
The value of dry rice surpasses that of its wet counterparts in all seasons due to its longer shelf life. Rice traders from Sindh province lament the fact that they are often unable to hold and export rice after March due to the lack of dryers. Consequently, they end up selling their produce when the market offers the least favorable prices. In contrast, our regional competitors in India benefit from better facilities, enabling them to store rice for up to two years.
In addition to the storage advantage, drying provides security against weather risks and empowers exporters to retain their stocks until they can fetch better rates. Unfortunately, in Pakistan, where rice is harvested from 3 million acres within a one to two-month time frame, there is no window for conventional drying. This situation is further aggravated by the imminent urgency of wheat sowing, which compels farmers to sell their paddy even when it contains 21 percent moisture. Consequently, the rice tends to discolor within a few months unless adequately dried.
Currently, the rice exported from Pakistan finds its way to the United Arab Emirates (UAE) through Indian-run processing mills in tax-free zones. From there, it is distributed globally, often bearing Indian stamps. Despite this convoluted route, our traders manage to make 20-25 percent profit margins per container, as per our sources. This leaves one to ponder the significant profits being made by the Indians.
While the initiatives outlined in the budget are commendable on paper, their effectiveness hinges on whether the government allows the necessary Letter of Credits (LCs) for implementation. The unrealistic figures presented in the budget have perplexed academics and industry professionals alike. It seems that the government is attempting to portray a picture of ‘business as usual,’ which starkly contrasts with the current economic uncertainty.
To transform the $5 billion rice exports target into reality, it will take more than mere announcements. Rice, being Pakistan’s second-largest export, deserves comprehensive support across all stages, from research to processing. By addressing the hurdles surrounding the availability and affordability of dryers, the government can foster a conducive environment for the growth of the rice industry. This includes facilitating access to LCs, reducing import restrictions, and providing financial incentives to promote the adoption of dryers in rice mills.
The exemption of duties on agricultural machinery, particularly dryers, presents a promising opportunity to enhance rice exports in Pakistan. By investing in the necessary infrastructure and enabling rice millers to adopt drying technology, the country can overcome the challenges posed by limited shelf life and unfavorable market conditions. It is crucial for the government and relevant stakeholders to collaborate closely to turn this vision into a reality.