However, this as a temporary delay, considering Iran's insufficient domestic rice production and depleting inventory levels to meet its demand, the rating agency ICRA
said in its latest update note on Indian Basmati rice industry.
The price cap of $850 per metric tonne (MT) could pose further hurdles for the Basmati rice industry, given that during the current procurement season average Basmati paddy prices have been higher by 20-25 per cent, Icra
said. Thus an inflow of orders from Iran, even after the import ban is lifted, remains to be seen, it said.
is a major export destination for Indian Basmati rice and decline in demand from Iran
has played a role in the declining realisations of exports
— from $1298/MT in FY2014 to $784/MT in 8M FY2017," Icra
Assistant Vice-President Deepak Jotwani said.
Over the years, the Iranian Government has imposed a ban on import of Basmati rice from time to time, according to the movement in inventory held by its rice traders and also to safeguard the interests of local farmers. Iran
last imposed a ban on import of Basmati in July 2016.
The Indian government sent a trade delegation to Iran
in January 2017 to resolve the issue. While there has been no official notification from Iran, a group of large Basmati rice importers in Iran
recently capped the price of Basmati rice imports
at $850/MT, the report said.
In another adverse development for the industry, the US recently imposed fresh trade sanctions on Iran, which restrains Iran's use of the US dollar for trade. These two developments have created uncertainty around the resumption of Basmati rice exports
to Iran, Icra
West Asian countries continue to account for the major chunk of imports
of Basmati; nearly 75 per cent of Indian Basmati rice exports
in FY16 were to these nations.
Within West Asia, Iran
and Saudi Arabia are the two largest buyers, together accounting for 40-50 per cent of total Basmati rice exports