Lifting of Iran sanctions boon for basmati

Export to Iran might hit a record high

Lifting of global economic sanctions on Iran could, it is hoped in the trade, enable a new record for basmati rice export to that country from here in 2015-16. Iran is also expected to cut import duty on Indian basmati from 40 per cent now to 20 per cent from the new season, starting October.

Our basmati export was a record 1.44 million tonnes in 2013-14, due to Iran's stockpiling of aromatic rice amid hardening of economic sanctions by Western powers. These plunged 35 per cent (to 0.94 mt) in volume and 39 per cent in value ($1,108 mn) in 2014-15, with Iran almost halting the import from India since October last year.

Consequently, Iran slipped to second place (Saudi Arabia was first, about three per cent more) in 2014-15 after two years of leadership in our export destination. As a rule, Iran takes nearly 25 per cent of India's overall basmati export.

"Working on (last year's) lower base, we can see 40-50 per cent growth to surpass the previous record of 1.44 mt this financial year," said Ajay Sahai, Director General of the Federation of Indian Export Organisations.

Actually, agricultural commodities weren't formally covered by the Iranian sanctions but its ending would enhance the disposable income of Iranians through widening of trade. Iran had reduced basmati import from India for two reasons. They had a large inventory from earlier shipments and, second, there were issues with arsenic levels in the rice. India is contesting that argument but it is possible that some of the rice came from belts where this is this problem and shipment could resume from elsewhere to address these concerns.

Rice import into Iran attracts a 40 per cent duty in their harvesting season, which ends in October. Once the import duty is reduced to 20 per cent, which happens normally in the lean season, India's export should commence in a big way.

"The lifting of sanctions would have a positive long-term impact on India's rice export," said Karan A Chanana, chairman, Amira Group, shipper of one brand of basmati.

Data compiled by the US department of agriculture says Iran's overall rice import might rise marginally to 1.7 mt in 2014-15 (August-July) as compared to 1.65 mt the previous year. The Food and Agricultural Organization (FAO) of the United Nations estimates Iran's rice production at 2.7 mt in 2015, almost similar to the 2.6 mt in 2014. This means the additional consumption would be met through import -- and India contributes a little over 90 per cent of Iran's basmati import.

"Many Iranian importers have set up offices in Saudi Arabia to import basmati from India and supply to Iran. They would also add enough quantity after the lifting of sanctions," said Gurnam Arora, joint managing director, Kohinoor Foods.

He estimated India's basmati output around eight mt this year, similar to last year.