The recent policy change by India to lift the minimum export price (MEP) on basmati rice and ease restrictions on non-basmati exports has caused alarm among Pakistani rice exporters, who had previously benefited from India’s export restrictions. Pakistan, a key player in the global rice market, now faces increased competition as India, the world’s largest rice exporter, looks to reclaim its market dominance.

In fiscal year 2024 (FY24), Pakistan saw a significant boost in rice exports, earning nearly $3.9 billion, compared to $2.15 billion in the previous fiscal year. This growth was largely driven by India’s restrictions, which limited its exports and gave Pakistani rice a competitive edge, particularly in key markets such as the European Union and Middle East. However, India’s decision to remove the floor price on basmati rice exports, which came into effect in September 2024, could have major consequences for Pakistan’s rice industry.

India’s Policy Shift

India had previously set an MEP of $1,200 per tonne for basmati rice to stabilize local prices and ensure domestic supply. This policy, along with restrictions on non-basmati rice exports, was designed to manage rising inflation and food shortages within the country. However, declining demand in international markets, coupled with pressure from rice exporters, led the Indian government to lift these restrictions, allowing rice to be exported at more competitive prices.

The removal of the MEP is expected to boost India’s export volumes significantly, particularly in markets where India and Pakistan have traditionally competed. As India re-enters the global rice market with more competitive pricing, Pakistan could face the dual challenge of lower prices and reduced market share.

Concerns from Pakistani Rice Exporters

Pakistani rice exporters have expressed serious concerns over India’s policy shift. According to a spokesperson from the Rice Exporters Association of Pakistan (REAP), the country risks losing its competitive edge unless immediate action is taken. Pakistani basmati rice has historically been priced 10-15% higher than Indian rice due to higher production costs and export-related taxes. With India’s prices expected to fall, Pakistan may need to lower its prices to remain competitive.

“We have already written to the Trade Development Authority of Pakistan (TDAP), urging them to lower the MEP for basmati rice from its current level of $1,300 per tonne to around $900 per tonne. Six months have passed, and no action has been taken,” said the REAP spokesperson.

Pakistan’s Market Position at Risk

Pakistan is the world’s second-largest exporter of basmati rice after India, and its rice is renowned for its superior quality and distinct aroma, making it highly sought after in markets like the Gulf states, EU, and the US. However, with India now free to sell rice at lower prices, Pakistan’s high-end position could be under threat.

Economic experts, such as Fareed Ansari, believe that India’s strategy is a direct attempt to regain market dominance in key regions, especially the Middle East and Africa, where both countries have been fierce competitors. “This move by India will create immense pricing pressure on Pakistani rice exports. While we have traditionally relied on superior quality to justify higher prices, the new market dynamics may force us to reconsider our pricing strategy,” said Ansari.

The Impact on Export Revenues

Despite the challenges, some experts believe that Pakistan may not see a drastic reduction in export volumes, but the financial impact could still be significant. Hamid Malik, Co-Founder of the Agriculture Policy Research Institute, suggested that Pakistan’s export revenue could decline by as much as $400 million annually due to lower prices and increased competition.

However, Malik also noted that the situation may not be as dire as some fear. Pakistan’s reputation for high-quality basmati rice in key markets may help cushion the blow. “Pakistan only accounts for about 20% of the global basmati trade, and our established presence in premium markets like the Gulf, EU, and US should help us maintain some stability,” he explained. Malik also pointed out that the decision by India could be politically motivated, particularly with state elections looming in Haryana, a major rice-producing region. There is a possibility that India’s export policy could shift again after the elections.

Global Market Dynamics

The timing of India’s policy change is also significant, as it comes amid falling global rice prices. Experts suggest that Indian farmers have struggled to sell their basmati rice at $950 per tonne, prompting the government to act. In contrast, Pakistani basmati is still fetching prices just below $1,000 per tonne, though these prices could fall as competition heats up.

In markets outside of basmati rice, such as non-basmati varieties, Pakistan is likely to face even more challenges. Both India and Pakistan compete fiercely in African and Southeast Asian markets for non-basmati rice exports. With India’s restrictions now lifted, Pakistani exporters could find it harder to maintain their foothold in these regions.

Strategic Next Steps for Pakistan

Industry experts agree that price cuts alone won’t be enough for Pakistan to remain competitive. Instead, they suggest that Pakistan focus on marketing its rice more effectively in premium markets, emphasizing the superior quality of its product. Additionally, Pakistan could explore new trade agreements or expand existing ones to diversify its market base.

There is also a call for innovation in farming practices and product differentiation, such as promoting organic rice or other specialty varieties that command higher prices. By doing so, Pakistan can carve out a niche in the increasingly crowded global rice market.

In conclusion, while India’s policy shift poses significant challenges, it also presents an opportunity for Pakistan to rethink its strategies and innovate in order to maintain its competitive edge in the global rice trade.