After the US waived the sanctions on Iran for India by allowing it to import crude oil from the oil rich nation and continue work on the Chabahar port, New Delhi wants more. The Indian government is finalising guidelines for exporting basmati rice to Iran, its largest importer, by barter or through rupee payments.
The move has given some hope to exporters who are paying a higher price for procuring basmati. Last year, India exported basmati worth $4.17 bn of which Iran bought $905 mn worth of the rice. In the first five months of 2018-19, exports have already crossed $2 billion with Iran still being the biggest buyer and Saudi Arabia the second biggest.
When the US announced sanctions on Iran, farmers had already increased area under basmati cultivation. However, the exemptions granted to Iran and the easing of its payment crisis helped lift the sentiments of the basmati export market.
“Higher paddy price this season has put some pressure on the retail price, especially if you consider that there is a recession in the global market. However, there has been some stabilisation now and we expect a good basmati export cycle this year,” Kohinoor Foods joint managing director Gurnam Arora told Business Standard.
He said the ‘Iran issue’ had been resolved to a large extent and traders have been given a go-ahead to pursue barter deals and consignments valued in rupee terms. “The guidelines are being formulated and we are confident that Iranian basmati imports would start soon.”
Iran normally opens its market for basmati import by mid-November after taking into account its domestic production and demand matrices.
All India Rice Exporters Association (AIREA) executive director Vinod Kaul said the amount of basmati crop damaged was not significant and final assessments were being done.
“The new basmati crop has started coming to the market and we are confident that Iran would account for about 1 mt of exports this season,” he added.
India is also bullish about the prospects of the Chinese market, although China imports non-basmati rice varieties.
Recently, a buyer-seller meet was organised in China with 5-6 rice exporters. Those five were cleared for exporting non-basmati rice to China, taking the total of such mills to 24.
However, the Chinese basmati market would take a few years to ‘mature’ for the Indian exporters, Arora said.
China is the world’s largest producer and importer of rice and procures about 5 MT of the ceareal each year. Of this, India has estimated it can tap 1 MT. The country has planned to boost rice and sugar exports in a bid to narrow the trade gap with Beijing.
Meanwhile, basmati exporters have also been exploring other markets such as the US, European Union and Latin America, yet the results have not been encouraging.
Last year, total basmati exports from India stood at little over 4 MT with almost 80 per cent of the consignment going to the Gulf countries, led by Iran. However, exporters are still unsure if last year’s export figures could be matched.
Egged on by last year's global demand, farmers increased acreage and sowed new basmati varieties such as 1401, 1509 and 1121. “Sowing has increased but quality has been affected due to pest attacks. Yield has also been lower, resulting in a higher market price at a time when Iran market hopes have revived,” said Devendr Vora Director Friendship Traders, a new Bombay based trader – exporter.
Middle East, China and Iran may be big importers. Amid a high export demand and a smaller-than-expected, the crop market is bullish.
Haryana and Punjab account for 40-45 per cent of the total basmati production in India, followed by Uttar Pradesh at 10-15 per cent. India’s net rice exports (including Basmati) increased from 10.8 MT to 12.7 MT last year, allowing the country retain the top slot in the commodity’s global trade.