Iran runs out of dollars, India's basmati rice exports may fall 20%

Islamic Republic ordered nearly 30 per cent of India's basmati rice exports in financial year 2019-20, buying 1.3 million tonnes

India’s basmati rice exports to Iran may decline 20 per cent this financial year as the West Asian nation fails to make payment due to US economic sanctions, said a study.

Iran ordered nearly 30 per cent of India’s total basmati rice exports in financial year 2019-20, buying 1.3 million tonnes. The US economic sanctions have paralysed business in Iran, which is battling the crisis for a year now.

Indian exporters said they have cut shipments to Iran because of delay in payments linked to the Islamic nation running out of dollars. 

“Iran, which imports around 1.3 million tonne annually, is expected to register 20 per cent lower volume from India as payment-related issues continue from last fiscal because of US sanctions,” said a Crisil study.

Data compiled by the Agricultural and Processed Food Export Development Authority (Apeda) showed India exported 4.45 million tonnes basmati rice (worth $4.33 billion) in financial year 2019-20 as compared to 4.41 million tonnes ($4.72 billion) the year before. India recorded 4.01 million tonnes (worth $4.17 billion) for the financial year 2017-18.

“Exports to Iran is currently on halt due to delay in payment receivables. Owing to economic sanctions, dolalr availability remained scarce. But, Iran market is set to open very soon,” said Gurnam Arora, Joint Managing Director of Kohinoor Foods Ltd, the producer and exporter of Kohinoor brand basmati rice.
 

Indian rice exporters are exploring opportunities in South East Asia and South America to compensate for exports to Iran. Demand from European Union, the Middle East, South East Asia and the South American countries has increased.

“There will be no impact of decline in export volume to Iran on India’s overall shipment of basmati rice as demand from other markets has increased,” Ashwini Arora, Director, L T Foods, the producer of Daawat brand basmati rice, had said in a recent interaction with Business Standard.

Demand for basmati remained strong in nationwide lockdowns to contain the coronavirus outbreak, prompting rice companies to accept orders by seeking higher advances or letters of credit. They plan to use the advance monies to cut working capital debt. The aromatic rice demand from the US, the UK and the Middle East (excluding Iran), which account for more than half of India’s annual basmati export, has increased because these countries are building food security buffers amid the Covid-19 pandemic.

The Crisil report said the average export realisation at Rs 63 per kg this fiscal compared with Rs 69 per kg in the last fiscal. Realisation from the domestic market, accounting for 2 million tonne sales annually, is seen stable at Rs 52 per kg on strong retail demand.