Lack of R&D behind falling Basmati rice exports - Shahzad Ali Malik, CEO Guard Rice

Shahzad Ali Malik, the CEO of Guard Rice, is the pioneer of modern rice industry in Pakistan. He is the Director of the Guard Group, and is known for his vigour for R&D in the rice industry through latest technologies and new varieties. He is also the former President of Lahore Chamber of Commerce and Industry (LCCI), and is among the founders of Rice Export Association of Pakistan (REAP). Following are the edited excerpts of a recent conversation of Mr., Malik with BR Research.
BR Research: Walk us through the early developments and dynamics of the rice sector.
Shahzad Ali Malik: In 1989, Government of Pakistan decided to privatise rice exports and disbanded Rice Export Corporation of Pakistan (RECP). Before this, RECP was the sole rice procurement agency in the country; Passco procured in small quantities, while the rest was procured by the private sector for domestic consumption. As a result, Rice Export Association of Pakistan (REAP) was formed in 1988-89 with ties with the Ministry of Commerce and Ministry of Food, Agriculture and Livestock and the Planning Division.
The rice industry is the second largest foreign exchange earner after textile sector. The privatisation of the sector played a key role in increasing the rice exports in the country. In the beginning, Pakistan's annual rice exports were around $150-200 million. With the coming of the private sector into the game, these numbers have touched $2 billion over the 25-year period. After touching the highs, Basmati and IRRI export shares are now $1.4 billion and $600 million from one billion dollar each.
BRR: What varieties of rice does Pakistan export?
SAM: In Pakistan two major varieties of rice that dominate the local and international market: Basmati, and IRRI (the normal long grain rice). IRRI is mainly grown in Sindh and is of lower quality than Basmati; majority of this variety is exported. On the other hand Basmati is an aromatic long grain variety originally cultivated in Pakistani Punjab only. Later India also started sowing this rice seed in its part of Punjab. 50 percent of Basmati is consumed locally, while the surplus is exportable.
BRR: Tell us about Guard Rice?
SAM: We are Guard Agri, part of the financially strong, highly diversified Guard Group of Companies, established in 1948. We entered the rice market at the right time; Guard Agri was established in 1989, as the first private sector company with its own Rice Research and Development (R&D) facility. We are not just a rice company; we are also a seed company where we look after the seed.
Guard Rice pioneered the introduction of packaged and branded rice in Pakistan, and it is the only national brand with distribution in all major cities of the country, as well as modern trade outlets. It is also the largest export brand with presence across 36 countries. We introduced hybrid course grain rice variety in Pakistan about 15 years back, and today 30 seed companies are marking IRRI hybrid in Pakistan including four multinationals. Basmati Rice is our heritage, and we are now also looking into producing Basmati hybrid seed in collaboration with our Chinese and local experts. Right now 60 percent of our revenues are coming from IRRI seed, while 40 percent comes from local sales and exports of Basmati rice.
BRR: How has lower commodity prices affected rice exports?
SAM: The decline in global commodity prices did not have so much impact on our coarse grain high yield hybrid IRRI varieties because of lower cost of production due to the increase in yields.
BRR: What is a key challenge for the rice industry today?
SAM: The issue lies in the sub sector: Basmati rice. While IRRI exports have been either growing or stabilising over the years due to hybrid technology, Basmati is facing issues. The cost of production for IRRI is coming down in Sindh, and thanks to double the yield of Hybrid technology, exporters are able to compete with countries like Vietnam, Thailand. However, Basmati rice exports are stagnating and slowing down. Though the research is going on to develop Basmati through hybrid technology as well, our public sector research institutes have not been able to bring any new high-yielding Basmati varieties in the country since the eighties, which has resulted in a constant decline in its per acre production, leaving a window of opportunity for India to gain foothold in the international market for extra-long grain high yielding varieties. The last extra-long grain high yielding Basmati varieties introduced in Pakistan were long grain Basmati 385 in 1980s and Super Basmati in 1990s, after which no new variety has been brought forward; their use for 25 years has weakened the seed varieties and declined the yields sharply.
BRR: What are some suggestions and proposals you think could open opportunities for Pakistan's rice industry?
SAM: We have lost a huge Iranian rice market to India. Iran imports around 1.5 million to 2 million tons of rice annually. Amid all its international sanctions, India was able to arrange a currency swap with Iran in the name of food for oil, which enabled it to penetrate and capture the entire rice market. We are now proposing that since Pakistan has signed a PTA with Iran, five products from both countries should be rendered zero-import duty. Of course, we propose one of the items from Pakistan to be Basmati rice in order to get back the lost market to India. We used to export around 200,000 tons of rice to Iran, which has not reduced to nothing at all.
However, we must be mindful that the advantage India has over us in Basmati rice is lower cost of production. Also, India is way ahead of us in research and development in all crops, and particularly in rice.
Their Basmati variety called 11-21 has captured the global market, and the seed has also made inroad informally into Pakistan. 11-21 is illegally being grown and exported from Pakistan.
Here too we have rigorously suggested the Government of Pakistan to approve it and give it a legal cover to bring it into the market as today there is more sowing of 11-21 than Super Basmati in Punjab due to better yield, international acceptance and importer demand.