India gets a positive indication of the resolution of payment over Rs 1700 crores against shipments since December 2019. Rice exporters in India expect Iran to begin basmati rice import by January 2021.
Executive Director, Vinod Kaul, All India Rice Exporters Association confirmed that the Iranian government lifted its seasonal ban on imports a month in advance. Also, the government has given positive indications on the resolution of the stalled remittances issue. Exporters claim that they are discussing basmati exports with Iranian importers. Besides, they are waiting for currency allocation by the Central Bank. Further, AIREA has also requested the Iranian government to consider permitting third-party payment mechanisms in dollar and UAE dirham. If everything goes well, exporters will start signing contracts for January delivery soon.
Competition from Pakistan
Pakistan is working to gain a foothold in Iran for basmati. The western Asian country increased its imports of basmati from Pakistan as India’s exports declined due to payment-related issues. However, AIREA stated that it’s a temporary phenomenon as exports from India to Iran are about to resume soon. Besides, if Iran is unable to release payments to India, then it may also find it challenging to pay Pakistani exporters.
Depleting US Dollar Issue
Exports for basmati exports to Iran witnessed a decline of 36% during the April-August period this year. India cut out its shipments to Iran as the western Asian nation experienced a shortage of dollars. The dollar-dominated trade was not feasible between India and Iran. Hence, both countries put the rupee-rial trade mechanism in place in 2018. However, after the imposition of a sanction by the US, the Central Bank of Iran was unable to allocate payments to importers. Consequently, a large number of consignments from India to Iran were stuck at Iranian ports.
Falling Basmati Paddy Prices
While private traders are buying Basmati 1509 variety at Rs 1800 per quintal, paddy is being sold at Rs 1900 to government agencies. Farmers complain that the superior long aromatic rice is getting less price than paddy. Further, they accuse exporters of buying the fine rice at a much lower cost of around Rs 2500 previous year. However, exporters claim that the price decrease is due to tepid demand for exports from Iran.
The price for Indian basmati is 15% less than the previous year. It is likely to increase with the resumption in exports to Iran.
In all, there are prospects of trade revival with Iran that will save exporters from the difficulty of looking for a new market for basmati.