Rice importers call for 25% subsidy

Vivian Salama

• Last Updated: May 11. 2008 7:49PM UAE / May 11. 2008 3:49PM GMT

Importers, anxious over the rising prices of basic food items, are calling for the Government to subsidise rice by at least 25 per cent.

Importers say their margins are being squeezed and, in some cases, they are making losses as they attempt to reconcile record commodity prices with a demand by retailers to keep costs down.

“Rice is the most basic food item so, of course, it should be subsidised,” said Riaz Hussein Bhojani, the general manager of Rashwell Company, a Dubai-based importer.

Global rice prices jumped from US$650 (Dh2,386) to US$1,000 per tonne in just the first three months of this year, hitting a 25-year high. India’s basmati rice export prices have also gone up from US$1,100 to US$1,200. In response, several retailers, including Baniyas Co-operative Society, Carrefour, the Union Co-operative Society and Lulu hypermarkets have agreed to implement price caps on dozens of basic commodities.

“International rice prices are going through the roof so, by fixing retail prices here at 2007 levels without subsidies, the Government is not taking into consideration what importers will have to face. And [they are] making room for a black market,” an Abu-Dhabi rice importer told Reuters. “I think that asking for only 25 per cent rice subsidy is a fair and modest demand.”

Last year the UAE imported about 750,000 tonnes of rice from countries including India, Pakistan, Thailand and Egypt, traders said. According to Mr Bhojani, one tonne of Pakistani basmati rice now costs his company Dh5,505 to import, up from Dh2,569 last year. A 39kg sack of Pakistani basmati rice costs him as much as Dh230.

“It is difficult for me to understand why the government is giving millions of dollars to other countries and not helping its own people,” Mr Bhojani added.

A senior official with the Emirates Society for Consumer Protection, a branch of the Ministry of Economy, believes that rice subsidies are not a solution to the crisis.

“Salary subsidies would be a better economic option than rice subsidies,” he said, noting that the Government was not presently considering such a move. The Government is days from announcing a contingency plan to alleviate the burden of inflation on UAE residents, the official added.

The Abu Dhabi Department for Planning and Economy has reported a 10.7 per cent jump in inflation last year, driven by higher rents, transport and food costs. According to the Emirates Consumer Protection Society, food inflation could rise as high as 40 per cent this year.

While several countries in the region have used subsidies as a way of addressing domestic poverty, high inflation has forced some to reconsider.

In Syria, for example, basic items such as sugar, tea, bread and water are subsidised at a price the country’s poorer residents can afford. However, with the influx of more than 1.5 million Iraqis to Syria since 2003, the country’s lawmakers have considered dropping subsidies as the economic burden becomes increasingly hard to absorb. Food and energy subsidies in the country are predicted to cost US$7 billion this year – almost 20 percent of the country’s gross domestic product, according to government estimates.

Burhan Turkmani, the general manager of Al Rabiah Trading, a Dubai food importer, said he was not optimistic that subsidies would be applied here, despite believing that a 25 per cent subsidy was a reasonable demand. “It is a rich country and the economy is strong, so I believe the Government can certainly absorb such a cost. But I don’t think it will happen because of the high number of foreigners living here,” he said. “I think a government’s first priority is to help its own citizens, so maybe rice subsidies are not on the top of the list.”

Among other measures, the Government is exploring the option of purchasing farms in Pakistan in an effort to boost strategic food reserves. Last month the Ministry of Economy urged retailers to start stockpiling basic food items to prevent shortages caused by export bans in countries such India, Egypt and Brazil. The Government has since recommended that, as a cost-cutting measure, retailers consider eliminating the middlemen when importing commodities.