Pakistan rice subsidy extension unlikely to improve price competitiveness

The extension of Pakistan's duty drawback on rice exports by three months, till Sept. 30, is unlikely to significantly affect Pakistan's global competitiveness in FOB prices, given already elevated pricesand tight domestic supplies, market sources told Platts, part of S&P Global Energy, on July 3.

Pakistan has extended its Drawback of Local Taxes and Levies (DLTL) order for rice by three months through Sept. 30, providing exporters with continued financial support for rice shipments over the period, according to several media and market sources.

The extension maintains existing subsidy rates of 9% for basmati rice and 5% for non-basmati varieties, sources said. However, market sources, especially exporters, said the move is unlikely to improve the competitiveness of FOB rice prices in Pakistan, given already elevated levels and tight domestic rice supplies.

"Already prices are high, market quoting at about $430/mt FOB and above," a Pakistan-based rice trader said, adding that limited crop availability would constrain any potential benefit from the subsidy extension.

Pakistan's crop supplies for the marketing year 2025-26 are depleting rapidly, while sowing for MY 2026-27 (November-October) is underway with monsoon rains and weather conditions remaining critical factors for the upcoming harvest expected to begin in late August to September, Karachi-based trade sources and exporters said.

Sowing has started in some areas of Pakistan, according to a local seller.

However, another Pakistani exporter said, "Main crop sowing in Pakistan is slightly delayed due to water availability issues in key rice sowing areas. Although most of Pakistan's rice irrigation is canal-fed, we expect slight delays in sowing and, ultimately, in harvest for the next crop. Moreover, rains have been delayed in areas like Sindh, most likely due to El Niño weather effects."

According to S&P Global CERA's estimates, Pakistan's harvested area for rice in MY 2026-27 is expected to reach 3.5 million hectares, down about 8% from MY 2025-26.

The DLTL scheme, administered through Pakistan's Export Development Fund Board, provides exporters with remission of duties and taxes to enhance competitiveness in international markets. The extension comes as Pakistan's rice sector faces uncertainty over potential import restrictions in the Philippines, a key market for Pakistani rice, while other international buyers have largely remained absent from the Pakistani white rice market.

Market participants said trading activity slowed following a buying spree from the Philippines in June. However, with rising FOB prices, competition is intensifying with rival origins including India, Thailand, Vietnam, and Myanmar.

"Trading activity is slow now that the Philippines is also considering import regulations. However, we are still running with very low good quality supplies, and the number of damaged kernels in paddy is now high, leading to higher milling costs to cover already made deals to the Philippines," a Karachi-based rice exporter said.

Platts assessed Pakistani 5% broken white rice at $417/mt FOB on July 3, while Indian 5% broken white rice was assessed at $355/mt FOB, Vietnamese 5% broken white rice at $409/mt FOB, Thai 5% broken white rice at $464/mt FOB, and Myanmar 5% broken white rice at $470/mt FOB.

Market participants said they would closely monitor monsoon progress and the Philippines' decision on import restrictions in the coming weeks, as both factors could significantly influence Pakistani rice export flows and pricing dynamics through the third quarter.