UAE | General
Price cap on basmati rice may cause severe shortage soon
Basmati rice, the most popular grain in the UAE, has started vanishing from supermarket shelves because a sharp cost increase coupled with a rise in domestic demand in exporting countries has resulted in a shortage of supply.
- By Ashfaq Ahmed, Chief Reporter
- Published: 00:45 February 14, 2008
- Image Credit: Gulf News
- Pakistani traders reduce supply, demand higher rates for products.
Dubai: Basmati rice, the most popular grain in the UAE, has started vanishing from supermarket shelves because a sharp cost increase coupled with a rise in domestic demand in exporting countries has resulted in a shortage of supply.
Some major Pakistani rice exporters are considering reducing exports further or completely withdrawing from the UAE market as they are not getting the rate they demand, said officials and suppliers.
"The price of basmati rice has shot up 100 per cent during the past year because of a reduction in crop production by about 20 to 25 per cent, in addition to an increase in domestic consumption in Pakistan and increasing exports to Iran, China and other Gulf countries," said Zahid Khawaja, president of the consortium of Basmati Rice Exporters of Pakistan.
He told Gulf News that the exporters have been incurring heavy losses for the past three months since the UAE Ministry of Economy capped prices of rice imported from Pakistan.
"We also expect a further 70 to 75 per cent increase in rice prices this year," he said.
He said the price of Pakistani rice was fixed at Dh115 for a 39kg bag early last year and was increased to Dh140 last October. However, exporters are forced to increase prices again because of a constant price hike for raw rice in Pakistan since October.
The prices of Indian basmati rice are already 40 to 50 per cent higher than Pakistani rice.
Leading supermarkets in the UAE said they are facing a shortage of basmati rice because suppliers are demanding higher rates.
Market sources in Dubai said that price of Pakistani Basmati rice had gone up by nearly 25 to 30 per cent compared to prices in October 2007, citing a shortage in supply as the reason.
"There is a shortage of Basmati rice in the market," Abdul Hakeem, purchasing manager of KM Trading in Dubai, told Gulf News.
"Suppliers have been demanding price rises. This cannot be achieved because of the price limit imposed by the local authorities. This way the imports have gone down," he said.
Abu Dhabi Cooperative Society (ADCOOPS) said there is a shortage of both Indian and Pakistani rice in the market.
"It is due to an increase in local consumption in exporting countries. We are taking adequate measures to ensure availability of stocks", said Bijoy Thomas, marketing and promotions manager of ADCOOPS. "There is market pressure to increase the prices but we will not approve any increase until the Ministry of Economy endorses it," he said.
Bilal Pasha, commercial counsellor at the Pakistani Embassy in Abu Dhabi, said: "Pakistani exporters are not ready to provide rice at the current rate because prices have increased by more than 100 per cent in Pakistan."
He also noted that the price of Indian rice is much higher than Pakistani rice.
"Pakistani suppliers want a level playing field because they believe that their rice is underrated," he said.
Gull Memon, chairman of the Mehran Group of Industries, which distributes Mehran Rice in the UAE said: "We have already reduced the supply of rice by more than 50 per cent to UAE. Our brand is off the shelves in supermarkets because of the pricing issue."
He said that the issue has been going on for six months.
"We have started targeting other markets in the Gulf which offer much better prices and this may lead to a severe rice shortage in the UAE," he said.
Memon said that if the price cap continued, consumers in the UAE would not be able to get quality rice.
"Low-quality basmati rice is already in the market at lower prices," he said.
Food costs: The upward spiral
The fixed price of quality super basmati rice imported from Pakistan sold in the UAE was between $560 to US$875 (Dh2,055-3211) per tonne. It was increased by about 20 per cent in October to around $1,050 (Dh3,850) and the price of a 39kg bag was increased from Dh110 to Dh140. Now, suppliers say that the rice has increased to $1,550 (Dh5,688) per tonne. That means one kilogramme of basmati rice should cost at least Dh8 instead of the existing Dh4 and Dh6.
- With input from Binsal Abdul Kader, Staff Reporter
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