Basmati prices fall 5% as India awaits clarity on Iran export payment mode

  • 13-May-2019
  • Basmati prices fall 5% as India awaits clarity on Iran export payment mode

Basmati paddy is being sold at Rs 4,700 per 100 kg –– which is around 5 per cent lower compared to a fortnight ago –– as traders and companies await government clarity on the export payment mechanism to Iran. 

The industry has requested the government to issue guidelines to ensure that payments against rice exports to Iran will be guaranteed in view of the US doing away with waivers for import of crude oil from Iran by India. 

Iran has remained the largest importer of basmati rice from India in recent years, by buying over 30 per cent of the total basmati rice exported from India. Traders said there was volatility in the market as things were unclear. 

“Market has shown a fall of 5 per cent since April 22 till date, although exporters have stock. Prices can further fall in the coming days if we don’t get clarity on Iran demand,” said Rajesh Paharia, a Delhi-based grain trader. 

Prices of different varieties of basmati paddy have seen a fall in Haryana mandi, he said.

“The 1121 steamed basmati paddy prices fell by 2.4 per cent to Rs 8,100 per 100 kg while the traditional basmati paddy has fallen 7.8 per cent to Rs 4,700 per 100 kg in the past 15-18 days,” said Paharia. 

Companies said that if Iran is unable to import Indian basmati rice because of the nonexistence of an export payment mechanism, then rice prices would go down in India in the coming paddy season. This could impact basmati planting in Haryana, Punjab, Uttar Pradesh, Himachal Pradesh and Jammu and Kashmir. Paharia said Indian companies have started talks with Saudi Arabia and traders in the UAE to offload the huge stocks they are holding now. 

“Now that the US has abolished the waiver for import of crude oil from Iran by India, there is uncertainty among exporters whether or not to accept fresh orders since they are worried about receipt of payments against such supplies,” said Vinod Kumar Kaul, executive director, All India Rice Exporters Association. Basmati rice is a major commodity in the agricultural export basket of India fetching close to Rs 30,000 crore in foreign exchange, said Kaul. An agreement had been signed by the Indian and Iranian government on November 2, 2018, that India will import crude oil from Iran using a rupee-based payment mechanism through UCO Bank. Under this bilateral mechanism, UCO Bank remits payment to Indian exporters against exports to Iran. 

In 2011-12, basmati rice exports from India to Iran was only 6.18 lakh tonnes. After setting up this bilateral payment mechanism through UCO Bank, exports from India to Iran grew substantially to 14.80 lakh tonne in 2018-19. 

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