Basmati exporters jittery, turmeric also hit over rising US-Iran tensions

Indian exporters have outstanding basmati payments to the tune of Rs 800 crore on Iran

The repercussions of escalating tensions after the United States (US) executed a top Iranian commander could have a bearing on India’s exports of basmati rice, which has made exporters of the commodity a worried lot.
 
To be sure, basmati exports to Iran, which stood at 33 per cent or about $1.56 billion in 2018-19, had already weathered uncertainty following the US’s sanctions against Iran last year. Recent developments have only added to this. Till October, exports were $570 million, which accounted for 26% of exports.
 
According to industry sources, there are pending payments from Iran of Rs 800 crore against total payables of around Rs 1,200 crore, making exporters reconsider shipping fresh consignments fearing payments defaults.
 
“Any escalation will have its impact on trade, including basmati exports from India. If the situation worsens, it will affect the cargo movements due to several factors, including safety concerns,” Vinod Kaul, executive director, All India Rice Exporters Association (AIREA), told Business Standard Saturday .
 
In the past few months basmati exports to Iran have been hit badly. “In fact, Indian exporters had booked good number of orders from Iran, but they are now worried about the safety of consignments and payments,” Kaul said.
 
Since, the preconditions forbade direct funds transfer to Iran for any bilateral trade, India had instituted a Rupee payment mechanism. Exporters and importers are now choosing to watch the outcome of the China-US trade deal, scheduled to be signed on January 15.
 
Turmeric exports hit
 
Turmeric exports, too, were hit by the US sanctions against Iran, the largest buyer of the finger turmeric or full turmeric. Shipments to Iran had come to a standstill in May, say exporters. Besides, food and pharma, demand from the tanning industry in Iran had spurred turmeric export.
 
The other major problem, according to Deepak Mazumdar, director of Deepkamal Exports, one of the leading exporters of turmeric, is “the dollar embargo by the US has hit turmeric exports and importers are paying only through select banks, which has been affecting the payments.”
 
Turmeric export in first four months in 2019 was 42,000 tonne, an increase of 10 per cent compared to 38,171 tonnes in the same period of the previous year, said Angel Commodities. Last year, India exported about 1.33 lakh tonnes of turmeric, compared to 1.11 lakh tonne in the previous year. Increasing demand of curcumin, a substance found in turmeric, in the pharmaceutical, food and cosmetic industries is a major factor driving demand for the spice globally.

With inputs from Dilip Kumar Jha