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Bad News For India Basmati Rice Exports as Iran Imposes Caps on Imports Prices

Date 09-Feb-2017
Subject Bad News For India Basmati Rice Exports as Iran Imposes Caps on Imports Prices

India’s basmati rice exports to Iran, a major destination for the long-grained aromatic rice from the country, is expected to take a big hit after Tehran put upper limits for import and consumer prices of the cereal. While India’s recent exports of the rice to the West Asian country cost the importer around $950 per tonne (landed price), the ceiling price imposed is $850 a tonne and the maximum consumer price set is $ 1.15 a kg. Clearly, realisations of Indian exporters will diminish under the price caps.

“This is unilateral imposition of a virtual import tariff. Iran government must realise that prices are decided by demand and supply… It is unfair to impose such restrictions,” a leading rice exporter told FE on condition of anonymity.

Iran had been the largest importer of PUSA 1121 variety of basmati rice from India; however, in fiscal 2015-16, India’s exports to Iran almost halved (see chart).

Sources said Iran is saddled with excess stocks of basmati rice as FY14 imports of 1.4 million tonnes from India was not exhausted while merchants continued to contract more imports in subsequent years. The high carry-forward stock resulted in shipment to Iran falling to around 900,000 tonnes in the FY15 and further to 700,000 tonnes last fiscal

Some exporters FE spoke to say that with the ceiling prices, it would not be economically viable to export rice to Iran. Iran consume more than 3 million tonnes of rice annually and a third of this demand is met by imports.

A 20-member Indian trade delegation comprising exporters and commerce ministry officials visited Iran between January 28 and 30 with a view to promoting exports. The delegation visited various Iranian departments including Food and Drug Organization, Government Trading Corporation and Trade Promotion Organization, Iran Chamber of Commerce and Rice Importers Association.

Iran had imposed a ban on rice imports during harvest season between July and November last year. “Domestic supply does not suffice to meet demand. We need imports, but imports that are limited and controlled,” Iran’s agriculture minister Mahmoud Hojjati had stated in November last year.

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. Iran and India also had agreed to have referral labs in India for testing rice consignments rejected by Tehran because of presence of pesticide residue.


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