Abstract
This paper estimates the extent of price distortions between domestic and world market prices of rice resulting from government pricing policies. Time series data from various secondary sources formed basis of this study. Nominal protection coefficients for rice were used for data analysis and calculated for the period of 1970-71 to ]990-91. The analysis revealed that despite the fact that Basmati rice was one of the major export earning agricultural commodities, rice prices for most of the reference period had been lower than world market prices. It was probably due to devaluation of Pakistani currency, wide fluctuations of rice prices in the world markets and floating exchange rate policy. Since prices are among the major determinants of farm output, therefore, increased rice production would have been achieved, if world prices were fully reflected in domestic markets. The movement of domestic rice prices in accordance with world market prices is expected to improve the efficiency of resource allocation and provide incentives to produce more rice in the country.
