21. Basmati PUSA 1121: Its Role in Strengthening Food Security

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1 170 India Commodity Year Book Basmati PUSA 1121: Its Role in Strengthening Food Security Anil K. Mittal On 29th October 2008, Government of India unveiled a historical Notification of recognizing Pusa 1121 as Basmati rice under the "The Seed Act, 1966", which was a unanimous and comprehensive demand of Basmati rice exporters. The Notification of Government of India has given a boost to Basmati rice exports, strengthened food security of the country as well as given a positive signal to the research teams. In this article I have endeavoured to undertake a hindsight analysis and interpreted data to assess the economic impact of this decision. Evolution of Basmati Rice Exports The export of basmati rice increased from 2 lakh MT to 11 lakh MT in the period to The growth pattern of Basmati rice may be classified into the following stages: 1. Beginning of Economic Liberalization of India 2. Implementation of WTO Agreements 3. Market Expansion of Pusa Basmati 1 4. Introduction of Pusa 1121 Basmati Pakistan was the dominant player in the Basmati rice segment in the international market during the 1980's. India had a mere 32 per cent market share in the global market in the year In the year , India reached the peak market share of 63 per cent. Recent estimates suggest that India has around 53 per cent market share. During the 1990's, Rice Export Corporation of Pakistan (RECP) was the canalising agency for the export of Basmati rice from Pakistan. The unveiling of globalization in India brought new milling, packing and marketing services to Indian exporters and enabled them to effectively compete with RECP. In the absence of private exports from Pakistan, Indian exporters penetrated the international market by offering traditional Basmati rice of good quality. However, after the private sector in Pakistan was permitted to undertake Basmati rice exports, Indian exporters faced stiff competition from their counterparts. A weaker Pakistani currency, non-availability of tax on paddy and the newly introduced Super Basmati variety enabled Pakistani Basmati rice exporters to offer a quality product at cheaper prices. In such a scenario, India introduced Pusa Basmati 1 in the international market with quality and price

2 Basmati PUSA 1121: Its Role in Strengthening Food Security 171 competitiveness. This enabled India to hold on to the markets gained from Pakistan and to stabilize the trade between the years 1997 to During the Uruguay Round of Negotiations of WTO, European Union introduced a formula called Head Note 7 in its GATT Schedule. The formula proposed was higher priced rice should attract lower import duty and lower priced rice a higher import duty. Under the MFN Clause of WTO, India received an import duty abatement worth of Euro 250 per MT. Therefore, Indian and Pakistani Basmati rice entered into European Union at zero import duty or negligible import duty. Consequently, the exports of Indian Basmati rice increased from 35,000 MT to 300,000 MT between the years 1995 and The Indian gain in the European Union market was at the expense of rice imported from USA. In this situation RiceTec Inc, USA attempted to patent Basmati rice. However, this attempt of the US Company was thwarted by the Government of India through the concerted effort of all stakeholders. Although Basmati rice was a popular rice variety among Indian consumers, the Western world was largely unaware of this variety. The Basmati patent case provided free publicity in the West. This also contributed to the growth of Basmati rice exports from India. During the year 2002, India faced stiff competition from Pakistani Basmati rice in view of the weak Pakistani currency, the trade structure and the quality of its Super Basmati rice variety. Consumers were also looking for improved versions of Pusa Basmati 1. It was in this environment that, Indian Agricultural Research Institute (IARI) brought a new seed variety, the Pusa 1121 Basmati, though this variety was not technically considered as Basmati rice. Trial cultivation commenced in the years 2003 and In the year 2005, India was ready with the first commercial consignment of Pusa 1121 Basmati, which was sent to Saudi Arabia. Pusa 1121 Basmati received overwhelming response from various export markets in view of fact that the cooked grain elongates 33 per cent longer than the cooked grains of other varieties which, in turn, provides 33 per cent additional serving. Economic Analysis of Pusa 1121 Basmati The cropped area acreage of Pusa 1121 Basmati was 54,490 hectares (ha) in the year The growth in cropped area was to the tune of 103 per cent in the following year. Further, in the year 2007, the cropped area of Pusa 1121 Basmati grew by another 111 per cent. While Pusa 1121 Basmati was replacing the production of notified Basmati rice varieties, the traditional Basmati rice varieties was being replaced by the CSR 30 Variety. In the year 2007, the production survey of APEDA did not include the area under CSR 30 variety since the exporters had been selling or labelling CSR 30 variety as traditional basmati rice. Table 21.1 Comparison of Notified and Non-Notified Basmati Production (in hectares) Year Notified Basmati Pusa 1121 CSR 30 Total Share of Non-Notified Variety % % % Source: APEDA Production Survey on Basmati

3 172 India Commodity Year Book 2009 Table 21.2 Cropped Area of CSR 30 and Pusa 1121 Non-notified Varieties (in hectares) CSR 30 Pusa Punjab Haryana Western UP Uttaranchal Total In the years 2005 and 2006 Pusa 1121 Basmati along with CSR 30 have occupied 16 and 28 per cent respectively of the cropped area. The production survey of APEDA was not reliable as it intended to reengineer the area proposition of non-notified Basmati rice varieties during those years. By considering this rapid increase in the cropped area, especially the growth of Pusa 1121 Basmati and CSR 30, it is estimated that these non-notified basmati rice varieties have occupied more than 70 per cent of the total Basmati cropped area. Due to excellent attributes of Pusa 1121 Basmati, it is estimated that the export of this variety is now more than 50 per cent of the total Basmati rice exports. The gross income from Basmati paddy cultivation was always above Rs. 40,000 per hectare. The following table provides comparison among the various varieties of notified and non notified basmati rice and non-basmati rice. The gross income from non-basmati rice is lower by Rs. 35,000 per hectare in the year 2004 in comparison to Pusa 1121 Basmati. This has enthused growers into allocation of traditional Basmati paddy growing lands for the sowing of Pusa 1121 Basmati. In the year 2007, the gross income from Pusa 1121 Basmati was higher by Rs. 90,000 per hectare in comparison to the income from traditional Basmati. Farmers allocate their farm field on the basis of the previous year's commercial experience, water availability and their perception of risk. Table 21.3 Yield, Price and Gross Income Comparison Variety Yield MT / ha. Price Rs. / qtl. Gross Income Rs. / ha. Non-Basmati Paddy Traditional Basmati CSR Pusa Basmati Pusa Strategic Marketing Response The development of Basmati rice exports is dependent on the strategic marketing response of India to the competition posed by Pakistan in various markets. Such response needs to be fine tuned by way of appropriate product and marketing strategies. The growth of Basmati rice exports suggests that the country has successfully adopted better marketing strategies to meet the competition of Pakistan. Although the country has penetrated the Pakistani markets in the recent past, the country is ill equipped to over throw the competition from Pakistan in

4 Basmati PUSA 1121: Its Role in Strengthening Food Security 173 view of product strategies. Thus, it is imperative to build the capacity of the Indian Basmati rice export industry in product development and product line extensions. The development of new cross bred varieties is important to meet the requirement of such product strategies. The following benefits shall be accrue to India if new cross bred varieties are included in the list of basmati rice varieties: The availability of new cross bred basmati rice varieties for export purposes would assist the exporters to compete and penetrate in the USD 250 million West Asian Market. The fierce price competition from Pakistan in the existing major markets may be challenged with effective product strategies. Consumers and importers shall be able to avail the benefits of a wide range of varietal or product choices. The higher yield of new varieties would significantly increase farm income (which is one of the major objectives of government in promoting the exports). Last but not the least, the most important thing to be kept in mind is that with the foreign exchange earned from every tonne of Basmati rice, the country can import three MT of long grain rice, which would be a major boon to the country in terms of food security, considering the country's growing population and increasing food grains consumption. Basmati exports from the country had gained the momentum during the economic and trade liberalization of programme of our country (since 1991). Before the emergence of Indian Basmati exports, RECP of Pakistan was dominating the Basmati rice export markets across the globe in quantity terms. Since the Indian government unveiled the liberalization policy, the Pakistani monopoly and RECP's market dominance began facing serious challenges from private Indian Basmati exporters in major markets such as Saudi Arabia, Kuwait, UAE, Europe and USA. To summarise, in the year 1995, Pakistani government freed exports of Basmati from the country to private exporters. Indian Basmati exporters started to experience stiff Pakistani competition in the recently gained markets and struggled a lot to position and retain the market since then. The competition from Pakistan was merely on the basis of price and not on account of quality parameters. The Basmati traders were forced to adopt the price competition strategy to respond to the fierce competition effectively. Pusa Basmati became an effective tool to resist the Pakistani competition in the major export markets of India. The higher yield of Pusa Basmati in comparison to traditional varieties motivated the farmers to switch over to the evolved Basmati variety in view of enhanced farm income. Pusa Basmati rice had the advantage of both price and quality over the Pakistani basmati rice varieties. Since then the twin edged knife of 'Pusa Basmati' has acted as a devastating weapon on Pakistani Basmati exports. There is an argument among exporters that if India expands the definition of Basmati rice, it would invite release of new Basmati rice varieties from Pakistan such as Basmati Millennium and Shaheen Basmati. Today, Pakistan does not have any official definition for Basmati rice. If these Basmati rice varieties had been better performing than any other Indian basmati rice,

5 174 India Commodity Year Book 2009 Pakistan would not have waited for such a long time to introduce the same in export markets. Therefore, Pakistan does not count these varieties to pose any threat or competition to Indian basmati rice export markets. However, India cannot be complacent and needs to release new Basmati rice varieties to defend and extend the gains in the export market. In the coming years we need a proactive approach and close monitoring of our competitor - Pakistan, as it is continuously developing and releasing new cross bred Basmati rice varieties to respond to the competition from Indian Basmati rice. India cannot officially compete with Pakistani Basmati rice varieties in the light of lack of official recognition for newly developed Indian Basmati rice varieties. If the disparity continues to prevail on the research and development and release of new Basmati rice varieties between India and Pakistan, the upgraded varieties of Pakistan will lay a strong foundation for their products in Indian influenced markets. Thus, the stagnancy in the availability of new cross bred Basmati rice varieties in our country has created an unhealthy environment against the sustainable development of Basmati exports from the country. Gains from the Iran Market Pakistan has lost substantial Basmati rice market in Iran to Indian Basmati exporters. The miracle of three lakh MT of the market to India is the contribution of the Pusa 1121 Basmati variety. The economic value of this gain is estimated at around USD 420 million or Rs. 1,760 crore. A leading business daily has reported that Pakistan Basmati rice exports to Iran was assisting drug trafficking through large money transfers. The money received by Pakistan and drug traffickers is a major threat to Indian security. Thus the market gained by Indian exporters (and the equivalent loss to Pakistan) has strengthened Indian security. In this sense, the PUSA 1121 Basmati variety has indirectly contributed to Indian security. Livelihood and Rural Development Pusa 1121 Basmati paddy has become a lucrative option to more than one million farmers in Punjab, Haryana, Western Uttar Pradesh and Uttaranchal. Pusa 1121 Basmati paddy farming has uplifted lives of several thousands of farmers in the past. We could say that basmati rice is the only agriculture success in the Post Uruguay Round scenario of WTO. Apart from the Indian middle class who have flourished in the post 1991 liberalization period through the fast growth in the services sector, farmers of this paddy variety have also experienced the direct benefit of globalization. Export of Basmati rice has increased the income of the farmers of Punjab, Haryana, Western Uttar Pradesh and Uttaranchal and enabled them to escape from the of vicious debt cycle even before the government announced the massive farm loan waiver.

6 Food Security and Pusa 1121 Basmati Basmati PUSA 1121: Its Role in Strengthening Food Security States such as Punjab and Haryana faces acute ground water shortage, which is an environmental concern, in view of the crop rotation of the wheat and rice crop. By encouraging Pusa 1121 Basmati paddy farming, the State governments have mitigated the long term environmental risk to a limited extent in the ground water situation. Therefore, the encouragement to Export of Pusa 1121 Basmati directly supports the government in the cultivation of non-basmati rice varieties or wheat cultivation and, thus, contributes to food security in the long term by minimizing the environmental concerns and improving the present situation on ground water. Basmati rice is notified as a Geographical Indication crop; the cultivation region is restricted to Punjab, Haryana, Western Uttar Pradesh, Uttaranchal and Delhi. The above mentioned States also mainly contribute rice to the food security programme of the Government. When the demand for Basmati rice grows in the export market, the allocation of higher land towards growing Basmati paddy cannot be indiscriminately undertaken in view of food security concerns. In such a scenario, the high yielding Basmati rice variety such as Pusa 1121 Basmati and CSR 30 helps India meet the export demand without the allocation of more lands towards Basmati paddy cultivation. Conclusion Today, India is grappling with deficient rainfall in North Western India and facing an alarming figure of 21 per cent decline of paddy area coverage for Kharif Season The introduction of Pusa 1121 Basmati has limited the usage of land on Basmati paddy cultivation in North Western Indian states, and has still been able to meet the export demand. In view of this, Basmati rice exports which are an important forex earner for the country in this global recessionary scenario will not decline in the coming months. Had the Pusa 1121 variety not been recognized as Basmati, there would have been large scale conversion of non-basmati Paddy land to Basmati paddy cultivation, which would have compromised our food security. I am sure that readers of this article would feel justifiably proud of the contribution of Basmati rice exporters in both addressing food security as well India's commercial interests. 175