The misuse of the Export Finance Scheme (EFS) facility, provided by the State Bank of Pakistan (SBP), has resulted in hoarding of rice by some exporters, pushing up the prices and creating artificial scarcity of the commodity.
Sources told Business Recorder that EFS for rice enabled the hoarders and stockists to manipulate rice supply to the real and small and medium rice exporters and thus increased the prices overnight. "It did not only dent the rice exports that marked the record exports of more than $1.2 billion last fiscal year but also made dearer this commodity for the poor masses", a rice exporter said.
Rice millers, traders and stockists, having huge bank finances, have hoarded stocks and pushed the prices to sky-high in just two months of the harvesting of the current crop. As short crop is estimated, it is feared that if the SBP would not squeeze bank finances to the hoarders, they might create shortage of rice in open markets to maximise their greed of profiting, as the next crop is 9 months away.
Following the slowed down process of industrialisation in the country, the flood of bank finances has mainly diverted to trading activities, which encouraged hoarding of rice, one of the essential commodities and daily need of masses.
The Export Finance Scheme, which is available for value-added commodities, was allowed to rice exporters by SBP in 2000. The EFS is operated in two parts ie Part I and Part II. Under Part I, the finance is given to exporters on pre- as well as post-shipment basis for 180 days, whereas under Part II, an exporter may avail the export finance limit based on half of his previous year export.
Mostly EFS Part II is being misused by exporters who availed huge bank limits against stocks pledged at current rate of 9 percent and, after paying bank's mark-up they are selling rice in open market at much higher rates of profit than that of exports at more margin.
"No doubt, Export Finance Scheme had geared up rice exports from $500 million to $1.2 billion, but now this facility is encouraging hoarding of rice, as our production size has decreased considerably, which is evident from current price hike," a rice trader said, adding that "in volatile market prices, quality of our exported rice has also been lowered immorally which is causing loss of consumer's trust in the international market built over the years".
The SBP should immediately suspend bank limits sanctioned to rice millers, traders and export refinance part II against pledge provided to exporters as current rice crop has harvested short by 25 per cent, he said.
Another rice trader said that Ministry of Commerce should also take action, on its own, to eliminate the rice exports on D/A payment and exports of brown rice. In most of the cases, remittance on D/A did not reach the country as the importers have refused to pay or discounted a huge amount on the plea of lame excuses of quality or other reasons.
Besides, export of brown rice is bitterly damaging the exports of white rice and bring no benefit to the country as it has to compete with own Pakistani milled value-added rice in the same international market.
Further, owing to high moisture content, brown rice causes problems to the indigenous milled white rice in many countries. The Ministry of Commerce also should discourage the sale of basmati rice in bulk quantity through tenders as this low price exported commodity competes with export of value-added basmati rice in the particular country. Export of Pakistani branded rice in consumers' packing should be encouraged which fetch premium price of Basmati rice in the international market.