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BW Businessworld

What’s Cooking?

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Depinder Singh Sidhu, 39 years, and his 64-year-old father Ripudaman Singh in Punjab's Ferozepur district have been into Basmati cultivation for two decades. But this Kharif season they will grow Pusa 1121, a new variant of Basmati, on their 12-acre farm.

"It is simple economics for us. There is less sweat and more income. If the surge in demand (for this variety) continues, we will get a higher premium on it," says Sidhu. A year ago, a close friend prodded him to try out Pusa 1121. Depinder devoted half of his acreage to it. "Six acres of this variant yielded approximately 11 tonnes. The rest of the farm gave us 5.5 tonnes of traditional Basmati". The bonanza takes a good 15-20 days less to kick in — Pusa 1121 matures fast in about 115 days. Sidhu will not let land lie fallow during the buffer — he will grow pulses to rejuvenate the land ahead of the wheat growing season.

Pusa 1121 has become quite a hit among farmers, exporters and traders. But it has also got embroiled into a controversy, spawned copycats and given heartburn to scientists worried about intellectual property. The rather oddly named grain has become quite a hot topic among all sorts of people.

The New Whiff
It has hundreds of new takers across the Basmati belt that stretches across the plains of Punjab, Haryana, and western Uttar Pradesh, the hilly tracts of Uttarakhand, Jammu & Kashmir and parts of north Rajasthan. Darshan Lal, a leading seed vendor in Amritsar, says there has been more than a 150 per cent jump in demand for seeds this season (Amritsar and Gurdaspur districts in Punjab are among the biggest Basmati clusters in India). Vikram Ahuja, managing director of Zamindara Farm Solutions, Punjab's largest privately owned farmer consul- tancy, points to the irregular monsoons. "It requires more water to grow Basmati. Pusa 1121 requires much less water, and fertilisers." Ahuja says it may account for more than 55 per cent of the expected bumper Basmati crop this year. "There is no doubt at all that Pusa 1121 is the new name for Basmati," adds Vijay Setia, former chief of All India Rice Exporters Association.

India exports 6 million tonnes of Basmati rice; around 70 per cent of world production. Pakistan follows with about 2.5 million tonnes. According to the Punjab agriculture ministry, the area under Basmati will cross 600,000 hectares this season, up from the 550,000 hectares last year. Last season, nearly 60 per cent of the acreage saw cultivation of this variety. Haryana, too, has also fallen to its charms – more than 55 per cent of the 450,000 hectares under Basmati is accounted by the new wonder.

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The Middle East and Europe are huge markets for traditional Basmati — the Indian and Pakistani diaspora, and the Arabs are committed consumers. There are hopes of new converts in Iran, Iraq, the US, Australia and South-East Asia. "We are sure that we have a great supply chain. We will keep our eyes open for newer markets," says Karan A. Chanana, group managing director, Amira Foods. Five years ago, Amira Foods had revenues of Rs 360 crore with sales of variants of rice; it has grown to Rs 1,080 crore on the back of Pusa 1121. "There is huge demand from restaurants and caterers in the US and Canada because it is cheaper, of the same quality and has a larger grain," he adds.

A few agri-economists have aired the view that prices will fall on the back of better yields in 2011-12. But exporters believe there is enough demand to absorb 20-25 per cent more by way of additional produce. At present, exporters buy Pusa 1121 at Rs 25-27 per kg on par with other traditional Basmati varieties. Farmers got Rs 30-35 per kg in 2009; last year, despite speculations of oversupply, they got more than Rs 30 per kg.

"As the yield per acre is higher than traditional Basmati, the farmer will still benefit," says Ahuja of Zamindara Farm Solutions. The problem, Setia notes "is the trading mechanism". His association has made a representation to the Ministry of Commerce to do away with the dealers' system. It is a system where dealers buy directly from farmers, clean the grains, do neutral packing and export it. But consumer would not know where the grain was procured from. Ahuja feels exporters need to be motivated to switch over to simpler trading routes like letters of credit and cash against documents from banks.

What Rice Is It Anyway?
The Ministry of Commerce recognised Pusa 1121 as a Basmati variety in 2008. But Europe feels it is not from the traditional Basmati family. It is keen to bring in any variant under the definition of Basmati as per its globally accepted Geographical Indications (GI). The Indian Agriculture Research Institute (IARI) does not buy this argument. The Iranians, too, had their objections, but have come around.

Pusa 1121 has longer, thicker grain, but is not aromatic. The traditional Basmati grain length is 7.25 mm; it expands to roughly 15 mm when cooked; its new avatar is 8 mm long and expands to more than 17-18 mm.

Of course, the IARI is busy with a Pusa 6 variety, which it hopes will improve yields by more than 25 per cent and be aromatic as well. But that is for another season. For now Europe does not allow genetically modified foods; it suspects Pusa 1121 to be one. "It (Europe) is a huge market for us, and for other exporters. We are trying to explain our position to the authorities," says Gurnam Arora, joint managing director at Kohinoor Foods. Setia, and his association, have asked the Ministry of External Affairs to take up the matter with the Europeans.

You have to contend with Pakistan, too. "Our first priority is to tackle the infringement done by Pakistanis," says a leading exporter who does not want to be named. "The Pakistanis are loaded with similar seeds and would eat away our business." Indian exporters fear Pakistani rivals have copied Pusa 1121 and now have a Version 2: Kiyanat 1121. IARI sources told BW that the agriculture ministry has already started the process to patent Pusa 1121. "We are taking legal opinion on this. We might not go in for a GI for this as we have recognised it as Basmati variety, but it is a fit case for a patent," says a senior official.

"They (Pakistani exporters) are smart. They are mostly marketing via open source," asserts Setia. Open source is neutral packing, where it does not bear the name and address of suppliers. Chanana of Amira Foods feels Indian exporters need not worry as Kiyanat is inferior to Pusa 1121. "The grain is much weaker, and would not be able to hold the market for long." But as Arora of Kohinoor Foods notes, the Pakistanis are pushing in newer varieties, and "this would only increase competition".

It is worth breaking bread over Basmati. Sorry Pusa 1121.


(This story was published in Businessworld Issue Dated 01-08-2011)