Despite payment delays in Iran, India’s basmati exports up 33%

India’s basmati rice exports continue to grow, especially to Iran, despite shippers facing payment problems from the largest buyer of the fragrant grain.

“Basmati exports are doing very well. They are 30 percent higher this year compared with last year,” former president of Delhi-based All India Rice Exporters Association (AIREA) Vijay Setia said.

According to the Agricultural and Processed Food Products Export Development Authority (APEDA), an arm of the commerce ministry, basmati exports in the first half of the current fiscal were up 33 percent at 27.44 lakh tonnes compared with 20.57 lakh tonnes during the year-ago period.

Though the per unit value realisation was low at $885 a tonne against $1,061 last year, the shipments have increased 17 percent in rupee value. In dollar terms, basmati shipments earned $2.4 billion in the first half of the fiscal.

The rise in shipments comes on the heels of Pakistan making a bid to make inroads in the Iranian market after India and other countries complained of payment delays.

“People are getting the payments for basmati exports from Iran but they are delayed. Shippers raised a hue and cry when they were delayed. The concern over late payments remains,” said Setia, also the executive director of Chaman Lal Setia Exports that sells basmati under Maharani brand.

According to a multinational company’s export official, basmati exporters were taking a risk by selling to Iran but they had changed their strategy.

“Exporters are stocking up the rice and selling there. They have set up distribution points. This is helping them continue exports,” the official said.

It also indicates that Pakistan's attempts were not paying off. Though India, which accounts for 70 percent of the world’s basmati production, exports to more than 200 countries, Iran alone accounts for 34 percent of the shipment.

In 2019-20, Iran was the biggest importer of basmati, buying 13.19 lakh tonnes valued at $1.23 billion compared with 14.83 lakh tonnes worth $1.55 billion the previous year.

In 2019-20, 44.54 lakh tonnes of basmati was imported against 44.14 lakh tonnes the previous year. The earnings were, however, lower at $4.33 billion versus $4.72 billion.

In October this year, veteran Pakistani journalist Muhammad Ziauddin tweeted that Iran was in the process of shifting its basmati rice import from India to Pakistan.

The 33 percent rise in basmati export comes after AIREA reported a drop in shipments during the April-July period. The drop was reported at a time when prices were on the downswing due to projections of higher production this year.

Basmati production was estimated to increase 10 percent this year to 6.13 million tonnes, mainly on a five percent increase in the area under cultivation.

In Iran, payments were being held up as the country’s central bank delayed allocation of the currency to Iranian traders to buy basmati and other commodities. This initially prevented Indian exporters from entering into new contracts.

AIREA said in June that 2.5 lakh tonnes of basmati valued at Rs 1,700 crore had got stuck at Iranian ports. Payments from previous shipments were also pending, it said. This seems to be in the past now.

The problem was on account of the slide in the value of the Iranian rial against the US dollar. It dropped to one of its lowest in June, hit by the US sanctions that have derailed crude exports. The country’s revenue from oil has plunged to $8 billion from $100 billion in 2011.

The rial is now trading at 250,000 to the dollar, recovering from 300,000 in early October.

With Joe Biden taking over as the president in January, Iran is hoping that the situation will improve, though it remains firm on its missile programme, which had invited sanctions.

 (Subramani Ra Mancombu is a journalist based in Chennai who writes on commodities and agriculture)