Harvesting losses: Behind the trouble on Punjab's rice farms
Mian Ghulam Ali Bhatti once had a steady source of income. Working at a government-run Savings Centre with a guaranteed monthly salary, he was a source of envy in his village of Piranay Kee where most people either worked as farmers, with uncertain earnings, or had odd menial jobs to make ends meet. Every morning, as he left the village in a crisp shalwar kameez with his hair slicked back elegantly to go for work in the nearby town of Pindi Bhattian, young men working in paddy fields and older folks preparing fodder for their livestock looked at him jealously.
This was slightly less than a decade ago. Then, something changed in the village: agriculture suddenly became very profitable around the late 2000s as prices of cash crops – rice, wheat and sugar cane – began moving up. Bhatti’s relatives, who would earlier toil in the fields to earn a pittance, started getting thick wads of cash by selling their produce at rates unimaginable earlier. Most of them could now hire farm hands or employ machines to do the most tedious jobs in the fields.
Many in the village started making, and spending, more money than Bhatti could. They bought brand new motorcycles and television sets, and rebuilt their mud houses with brick, mortar and reinforced concrete. Young men donning crisp clothes and slicking their hair back in the latest fashions became ubiquitous in the village. No one envied him anymore.
By 2008, Bhatti had had enough of not being able to benefit from the farmland revolution taking place around him. He resigned from his job at the Savings Centre 29 years before he would reach the age of superannuation and, for the first time in his life, started farming on his 17 acres of land. The times were good. For the first four years, Bhatti’s annual earnings were way above what he could make in a year from his job. Then a sudden slump hit the agriculture sector. Prices of agriculture commodities declined sharply and he started finding it difficult to retrieve his production costs, crop after crop.
The price of high-quality basmati rice, for instance, is half as much as it was in 2012, according to the statistics provided by growers and traders. That year, 40 kilogrammes of the best quality basmati rice sold for around 2,500 rupees; the price fell to 2,000 rupees for the same quantity in 2013. Next year, the price registered another steep decline, going down to 1,400 rupees per 40 kilogrammes. For the current crop, farmers fear they may be getting as little as 1,000 rupees for the same quantity.
Absent landowners who routinely lease out their lands are in a quandary as lease rates have dropped to 40,000 rupees from a peak of 65,000 rupees only a couple of years ago.
In the rice-growing central Punjab districts along both sides of the Chenab River – stretching from Sialkot in the east to Sargodha and Chiniot in the west – famers like Bhatti are despondent. Nervously tending their current rice crop, they are worried if they can even recoup their production costs. Many expect to incur huge losses as they have been doing over the last couple of years.
Haji Liaquat Ali Maqsood, a resident of Chiniot district who has acquired 105 acres of land on lease in nearby Pindi Bhattian for rice cultivation, gloomily predicts that he is set to suffer as much as 3.5 million rupees in loss. He has paid 60,000 rupees per acre in annual land lease under a two-year contract and spent about 30,000 rupees per acre on inputs such as seed, irrigation water, fertilisers and other assorted chemicals. The price of his crop is expected to be only half as much as the expenses on it, he tells the Herald.
Negative trends in rice prices have also dragged down the demand and rates for land leases. Absent landowners who routinely lease out their lands are in a quandary as lease rates have dropped to 40,000 rupees from a peak of 65,000 rupees only a couple of years ago. Many of them are finding it difficult to lease out the land at all.
Others are desperate. Having suffered big losses over the last three years, six and a half feet tall Bhatti appears oddly distressed. “I am so worried that I can do anything short of committing suicide,” he says on a hot summer day. Pale green rice fields around him seem to be wilting under the smouldering August sun.
Muhammad Ali Kalru, a middle-aged landowner in Chiniot, knows a thing or two about growing and selling rice. He cultivates a rice paddy on his own farm and also runs a business – known as arrhat or commission shop – that purchases rice from scores of other farmers for husking, processing and packaging it before it is sent to domestic and foreign markets. He tells the Herald that a number of commission shop proprietors in Chiniot are sitting on huge stocks of unsold rice from their purchases in the last two years. This, he predicts, is going to have a major negative effect on the quantity of the rice these traders can purchase this year.
Their problems mainly stem from Pakistan’s failure to export its surplus rice. For a number of years, rice exports have consistently declined. Their share in total exports went down from 11.3 per cent in 2009-2010 to 8.7 per cent in the first nine months of 2013-2014, reads the latest issue of the Economic Survey of Pakistan. For the same nine month period in 2014-2015, the share of rice exports in the country’s total exports stood at 8.8 per cent — still 2.5 per cent below its peak five years ago.
Other figures recorded by the survey are even more drastic. Basmati rice exports have “witnessed a decline of 22.5 percent in quantity term” in the first nine months of 2014-2015 fiscal year as compared to the same period in 2013-2014.
Yet, these export losses have not yet translated in the decrease in land under rice cultivation which, in fact, has increased. Since 2010-2011, according to the Economic Survey of Pakistan, the area under rice cultivation has increased from 2,365,000 hectares to 2,891,000 hectares in 2014-2015. This has been accompanied by an upward trend in per acre yield of rice which has increased from 2,039 kilogramme per hectare to 2,423 kilogrammes per hectare in the same period of time. In the combined outcome of these two factors, farmers have produced three per cent more rice in 2014-2015 alone than they did in the previous fiscal year.
Declining exports and rising yields have had the expected effect: a glut of rice in the market and consequently a collapse in its prices.
Shaikh Muhammad Afzal is a 50-something trader in Sahiwal. He is the vice-president of the local chamber of commerce and industry as well as the head of a Punjab-wide association of commission shop owners who deal in agricultural commodities. In his opinion, there is only one reason why Pakistan’s rice exports have fallen in recent years — a virtual halt in the commodity’s export to Iranian markets where, according to Afzal, “India has outclassed us”.
Media reports on international trade suggest that Iranian imports account for around 11 per cent of the global commerce in rice. Only a few years ago, Pakistan supplied the single largest part of these imports. With the imposition of international economic sanctions on Iran due to its nuclear technology programme, however, Pakistan’s trade relations with its south-western neighbour suffered badly mainly because the two countries do not have barter trade agreements and bilateral mechanisms for money transfers. Pakistan’s exports to Iran, therefore, fell to 43 million US dollars in 2014 from 182 million US dollars in 2010, according to a news report published in daily The News on September 2, 2015. In rice trade, India quickly stepped in to fill the gap.
India’s trade with Iran during these years also experienced a negative trend. In 2010, according to India’s commerce ministry, Iranian oil accounted for 17 per cent of all Indian oil imports. In 2014, this decreased to only six per cent.
But Indian rice traders were able to increase their exports to Iranian buyers because the two countries have barter trade agreements and bilateral currency transfer institutions in place. These allowed them to minimise the impact of the sanctions on bilateral commerce at least in export categories – such as food and medicine – which did not invite as stringent restrictions as, for example, oil trade did.
Another reason why India has been able to capture the lucrative Iranian rice market is the price advantage that Indian exporters are offering. India is selling high quality basmati rice variety at 800 dollars per tonne in the international market. This price, Afzal claims, is lower than even the production cost of the same rice variety in Pakistan.
Since 2010-2011, according to the Economic Survey of Pakistan, the area under rice cultivation has increased from 2,365,000 hectares to 2,891,000 hectares in 2014-2015.
Growers and traders in Pakistan both argue that Indian traders have been able to offer such low prices because of the generous subsidies, as well as technical and administrative support, that rice cultivation gets in India. The government in Pakistan, on the other hand, does not care much about agriculture, they complain.
Afzal, for instance, points out that the entire rice harvesting in India is done manually which ensures that the grain does not split during husking. On the contrary, he says, mechanical harvesting is common in Pakistan even though it leads to 15 per cent split grain which in turn decreases the exportable surplus.
In seed development and per acre yield, too, Pakistan lags far behind India. Growers claim that India’s most successful basmati rice variety yields 2,000-2,400 kilogrammes per acre whereas Pakistan’s most successful basmati variety has a per acre yield of 1,200-1,600 kilogrammes per acre. And in the last few decades, Pakistani research institutions have not developed even a single new variety whereas India has been introducing new varieties on a regular basis. In fact, many rice farmers in Pakistan admit sowing plagiarised Indian varieties to increase their crop yields.
Lack of strict quality control for exports is another reason why Pakistan’s rice exports do not get as positive a response in international markets as Indian ones do. Many Pakistani rice exports resort to blending and mixing high-quality varieties with low-quality ones. Some of them claim that they do so only in order to compete with exporters enjoying subsidies from their governments. Others see it as a dishonest practice to make quick bucks at the cost of the country’s long-term commercial interests.
The practice is rampant among rice processors and traders in the market town of Jalalpur Bhattian, about 23 kilometres to the north-west of Pindi Bhattian. “The low-quality varieties are processed and polished in such a way that no one can differentiate them from the high-quality varieties,” says Bhatti — the saving centre employee turned farmer. Such blended rice, however, does not cook and taste as good as the pure high-quality varieties do. When exported, the blended rice badly affects the reputation and credibility of Pakistani exporters, he adds. Their competitors with better business ethics, thus, get an obvious edge over them.
In September this year, Punjab’s agriculture minister Farrukh Javed undertook an official visit to Iran to look into the possibility of a revival of rice exports to that country. An official handout issued after the conclusion of the visit claimed that Iran had agreed to resume rice exports from Pakistan. The rice growers and traders could not have expected anything better — only if it were real.
Without a bilateral currency transfer mechanism being available between Iran and Pakistan, the revival of rice exports will remain a pipe dream as long as international economic sanctions against Iran remain in place, an official of the Rice Exporters Association of Pakistan is reported by a newspaper to have said. Ensuring that the two countries have “an effective, efficient and reliable formal banking channel of currency transfer” is vital for these exports, he is said to have argued.
In an interview with the Herald, minister Javed does not talk about putting in place the required money transfer mechanism. He, instead, focuses his energies on explaining that the malaise in Pakistan’s agriculture sector is way beyond the power and mandate of Punjab’s provincial government to resolve.
He mostly blames international developments for problems in the local agriculture sector. “Great changes have taken place internationally. New hybrid seeds have come in; genetically modified crops and seeds have arrived. Because of these changes, crop yields have increased,” he says. And these increased yields have depressed the commodity prices in global markets, he suggests. India, Javed says, has been able to withstand the impact of these changes because, in consonance with global trends, it introduced a new variety of long-grain non-basmati rice which has blown away the market.
There were some other unhelpful developments, too, such as China having started producing more rice than it consumes, which means that there is more rice available in the international market for export than there ever was, the minister explains. “And then the Iran factor came into play. That was our biggest market for rice export until India captured it,” he says. “It is difficult for the government to plan for these externalities.”
Javed says it is only in the long run that Pakistan can expect to address some of these external factors by, for instance, developing better rice varieties with bigger yields. For the short-term measures, he points to the reduced fertilizer prices and other subsidies being offered by the federal government in its recently announced multibillion rupee package for farmers. “We will continue to help the country’s farmers,” the minister vows.
Bhatti is waiting expectantly for these official promises for help to materialise. If they don’t, he may well be trying to get back to his old job at the Savings Centre.
— Additional reporting by Sher Ali Khan
This was originally published in the Herald's November 2015 issue. To read more, subscribe to the Herald in print.