Import payments from Iran halted since the escalation of US-Iran tension. The tussle between US and Iran may distress exporters of India.
The officials confirmed 20 ships stuck with one million tonnes of grains at Iran ports. The US sanctions are hampering the growth efforts of the country to provide vital commodities. International trading companies also affirmed delay in payment due to US restrictions, stifling processing transactions. The US banking sanctions and war escalation halted the Iran-India trade of basmati rice, tea, sugar, and soybean.
Rupee Payment Mechanism
India and Iran signed an agreement that facilitated the trade transactions between the two countries using India rupee. According to this deal, India deposited money in domestic currency for oil imports from Iran in UCO bank. Out of this, 50% of funds were attributed to payment of exports from Indian to Iran. Now, the bank has frozen these rupee accounts as crude oil import has stopped due to sanctions imposed by the US.
Though oil import has stopped, bank official confirms that exporters need not worry for payment till this fiscal end. They said that reimbursement depends on the availability of fund which is sufficient for making immediate payments. However, the problem would arise once this money exhausts.
The shipments of basmati have declined due to delayed payments and political tensions. Exporters complained that they have received around Rs 600 crores in the past few months. The payment of Rs 900 crores is still pending. Indian exported 5.22 lakh tonnes worth Rs 4,005 crores of basmati rice to Iran from April to October 2019. It exported 1.48 million tonnes the previous year. Iran accounts for 30% of basmati exports of India.
FIEO CEO, Ajay Sahai stated that neither the insurance nor shipment company has backed out. But the situation may get worse in case of tension escalation. It may lead to attacks on ships and shipping lines, disrupting the trade and increasing premiums. However, there is no concern currently for exporters to Iran.
In conclusion, Iran has an uncertain situation and India hopes for peace so that trade continues with regular payments.