Payment delays hit basmati rice exports to Iran
India’s basmati rice exports to Iran, which has been the largest importer of aromatic long-grain rice from the country for several years, have slowed recently, due to a delay in the settlement of payments to the West Asian country under the US’s sanctions.
Rice exporters said that the delays in settlement have been especially long in recent months as rupee reserve built up from the oil exports to India has depleted and a chunk of payments is being routed through third currency payment system using Dirham via Dubai.
“Its a complex process to get payment for basmati rice exports to Iran,” a leading exporter of rice from Haryana said on the condition of anonymity. He said that its would not be easy to replace Iran, which had share of 22% in the 4.55 million tonne (MT) of basmati rice exports from India.
According to trade data, India’s exports of basmati to Iran in the first two months of the current fiscal have veen flat at 0.15 MT compared to the same month’s previous fiscal. The share of Iran in the total basmati rice exports which was 29% in 2019-20 to 18% in April-May in the current fiscal.
Rice shipments to Iran had got a boost when India launched a rupee settlement mechanism from April 2012 with Iran to avoid sanctions from the US and EU. As part of the initiative, state-owned UCO Bank tied up with Iranian lenders — Parsian, Pasargad, Saman and EN Banks — for settlements of dues.
The system of rupee settlement continued till 2019 after India stopped buying crude oil from Iran. Importers in Iran are currently settling payments using traders’ accounts based in Dubai.
Out of the total exports of 4.55 MT of Basmati rice last fiscal, the top five countries had the share of Iran (22%), Saudi Arabia (21%), Iran (8%), United Arab Emirates (7%) and Yemen (6%).
Industry sources said that major exporters of basmati rice are has stopped shipment to Iran due to payment settlement issues.
A senior official confirmed that while there is a barter system of rupee payment for India’s exports of banana and imports of apples from Iran, for basmati rice exports most of the payments are through a third currency payment system.
According to the Directorate General of Commercial Intelligence and Statistics, the value of rice exports in FY23 rose by more than 15% on year to a record $ 11.1 billion from $ 9.6 billion in the previous fiscal.
The volume wise the rice shipment grew by 5% to 22.34 million tonne (MT) last fiscal year.
India has been the world’s largest exporter of rice since 2012 and currently has 45% share in global grain trade. India has a share of around 80% global trade of basmati rice.
Currently, India exports more rice more than the combined shipments of the next three largest exporters – Thailand, Vietnam and Pakistan.
The United States department of agriculture (USDA), in its June 2023 crop outlook, has stated ‘India is expected to remain the most competitively priced global rice exporter in 2024,’. USDA, while estimating the total rice exports from India to cross 24 MT next calendar year, has stated “this would be the largest amount of rice ever shipped by any country in a single year,”
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