Traders said a price war when the market first opened could benefit the consumer, although prices might then rise again.

At present the rice trade is controlled by a scheme that limits the number of operators. A total of 1,000, 90-tonne quotas are distributed among importers.

They are required to keep a reserve stock to provide 45 days of consumption and currently store 40,000 tonnes in depots.

Under a preliminary proposal, a two-year transition period will be given to the industry. From January next year, all 28 wholesalers will be allowed to import rice, while the 40 importers will be allowed to run wholesale businesses.

Wholesalers can apply from July for 200 quotas, including those from four importers who gave up licences this month. From January 2003, companies will be allowed to run businesses without trade barriers.

The source said a number of companies, including ParknShop and Henderson Land, were interested in entering the market.

A Trade Department spokesman said it was working with operators and the committee on how to fully liberalise the trade.

It said stock levels would drop because of changing dietary patterns and better transport.

James Foo Che-fuk, of importer Kwong San Hong, welcomed the policy.

'This is part of a worldwide trend to open markets,' he said.

Alan Siu Kai-fat, a member of the Rice Advisory Committee and an economist at Hong Kong University, said the price would drop as more operators competed in the market. He said the market could eventually be controlled by just a few companies.

'The market in Hong Kong is so small it can only accept three to four big operators.' The rice policy was established in 1955 to secure the staple food during the Cold War.

But the market is now shrinking. Only 320,000 tonnes of rice were eaten in 1998, a fall of 6.7 per cent on the previous year.

Editorial - Page 18