Iran's delay in resumption of imports to hinder Basmati exports' recovery

Delay in the resumption of imports by Iran is likely to hinder the recovery in Basmati exports from India, a report said.

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.

"Iran 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 India — 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 said.

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 from India.