The depreciation of the Iranian currency over the last few months, coupled with increasing pressure of sanctions by Western countries on trade with Iran, might affect basmati exports from India. Iran is the largest importer of basmati rice from India. India had exported 2.2 million tonnes of basmati rice in the last fiscal, of which around one million tonnes was shipped to Iran through Dubai.
However, the exact quantum of current exports to Iran could not be ascertained as country-wise data is filed annually. Exporters say the current situation is likely to hurt basmati exports to Iran.
Speaking to Business Standard, Kohinoor Foods Ltd Joint Managing Director, Gurnam Arora, said, "This year we were expecting total exports from India to touch three million tonnes on account of bumper production. Out of total exports, Iran contributes a significant proportion of almost 50 per cent.
However, the current sanctions on Iran by the Western countries might affect exports, as the exporters are not getting letter of credit (LC) from Dubai-based banks, which are dealing with Iranian banks."
The US government has imposed sanctions on all financial institutions dealing with Iran's central bank. This has affected the dealings of Dubai-based banks with Iranian banks, delay payments in the process.
Echoing similar sentiments, All India Rice Exporters Association,President Vijay Setia, said, "Indian exporters are exporting basmati to Iran on credit for 90-100 days. There have been payment defaults from Iran as the Iranian currency has depreciated sharply in the last few months, making imports costlier for them. So, a significantportion of the exporters' money is blocked, which may affect exports. If tension escalates between Iran and Israel, export of basmati rice can be affected."
If matters don't get resolved soon it may hurt exports in the next fiscal as well.
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According to data from the Agriculture Produce Export Development Authority (APEDA), actual export of basmati during April-October 2011 was 16.41 lakh tonnes, compared to 11.55 lakh tonnes during the corresponding period of the previous year. However, for the period April-January 2012, 25.80 lakh tonnes of basmati was registered with APEDA for export. (The quantity registered with APEDA could differ from the actual quantum of exports).
Arora said the higher minimum export price (MEP) of $900 per tonnes has also affected exports during November, December and January. "If the government had notified lower MEP three months back, exports would have grown by leaps and bounds. The government should notify $700 per tonne for all varieties of basmati as MEP as soon as possible as agreed in a meeting held this month," he added.
Exporters were insisting the government should lower MEP from $900 per tonne to $700 tonne in order to compete in the global markets. Although the Centre agreed to this suggestion in a meeting held on February 7, a formal notification is yet to be made in this regard.
The advisor to APEDA, A K Gupta said during the current year exports may go up 10 per cent, if the government notifies the MEP of $700 per tonne for all varieties.
According to reports there has been a bumper crop of basmati rice in the major producing belt - Punjab, Haryana and Western Uttar Pradesh - which has put pressure on prices.
Punjab and Haryana account for 60-70 per cent of total basmati output. Punjab has witnessed an increase in area under basmati cultivation by three to five per cent. Of the total production, 60 per cent is of the PUSA 1121 variety. According to rough estimates, there has been 10 per cent increase in total output this year, compared to 6.5 million tonnes last year.