Basmati rice exporters face Iran defaults woes; exports drop 7.2% in Q1

Default by Iranian importers on some Indian basmati rice brands under bilateral deals have hit our export of these products in the June quarter. The government has cautioned exporters to avoid private transactions with Iranian importers.

Data from the government's Agricultural and Processed Food Products Export Development Authority (Apeda) show our shipment of basmati declined by 7.2 per cent to 1.17 million tonnes for the April-June period, first three months of the financial year, from the same period last year.

Iran is the largest importer of India’s branded and unbranded aromatic rice (it took a third of all its export in the June quarter). Hit by trade restrictions from America, Iranian importers pay to Indian basmati exporters in rupees.

Many such transactions are done on a private basis without involving banks and regulators. Informed sources say a number of importers dealing primarily with private basmati exporters had defaulted in making payment of around Rs 5 billion.

“Usually, exporters get a certificate from Apeda and proper processes are followed. As per trade sources, several large basmati rice exporting firms have become non-performing assets with their bankers, due to non-receipt of payments against export of large volumes to importers in these brands,” said a senior Apeda official, on condition of anonymity.

According to trade sources, some Indian exporters were dealing privately with Iranian importers without opening of Letters of Credit, which guarantee the receipt of money from importers. According to the Apeda official, around a third of India’s basmati exported to Iran faces threat of default.

“We have taken up the issue with the trade ministry in Iran. But, it seems, Indian exporters would have to go only through the legal route to recover the money,” added the official.

Apeda has advised exporters not to register contracts for export of basmati or make arrangement for payment before applying to it in this regard. Exports should be against formal orders which include quality specifications and a mechanism for resolution of disputes.

“The situation might normalise in a couple of months,” said Gurnam Arora, joint managing director of Kohinoor Foods, an exporter of basmati.