CHANDIGARH: Already grappling with US President Donald Trump's 26 per cent tariff, the ongoing Israel-Iran war has triggered a fresh crisis in the Indian basmati rice export market. Indian basmati exporters find themselves caught in a web of woes, with stuck consignments, delayed payments, plummeting prices, and fears of a domestic glut.
Iran is the second-highest importer of Indian basmati after Saudi Arabia, with the sela (parboiled) variety particularly cherished in Iranian kitchens.
In the 2023–24 fiscal year, a total of 59.42 lakh metric tonnes (LMT) of basmati rice was exported from the country. Of these exports, basmati rice was mainly sent to five countries: 7 LMT to Iran, 11 LMT to Saudi Arabia, 8 LMT to Iraq, 3 LMT to Yemen, and 3 LMT to the US, with the remainder going to other countries.
This development is likely to severely affect Punjab, the highest producer of basmati rice in the country, accounting for 40 per cent of production, followed by Haryana and other states.
Speaking to TNIE, Ranjit Singh Jossan, Vice-President of the Basmati Rice Miller and Exporter Association, said, “Since the Israel-Iran war broke out a few days ago, the basmati exports to Iran have totally stopped, as the operations at the Bandar Abbas port in Iran have been suspended and many consignments of basmati from India which were sent are now stuck there as two ships carrying basmati are docked at the port but are waiting to be unloaded.”
“We export around one million tonnes of basmati to Iran which is approximately 15 to 16 per cent of total global export from India. Due to the present crisis, now around Rs 3,000 crore worth of export orders are hanging in a balance as no one knows how the situation will develop in the coming days as the banking infrastructure there has either collapsed or frozen, thus no transactions. We have just kept our fingers crossed,” he claimed.
“We are not able to contact the importers in Iran as they are mainly based in the country’s capital city, Tehran. When will the payments to our exporters be made, it is not clear. Thus, there is anxiety among the exporters and fear factor also. The reason for that and main cause of concern is that the Iranian currency might further devalue against the US dollar and thus the Indian exporters have to bear the financial losses,” he said.
Jossan added, “Before the conflict between the two countries began, one US dollar was equal to 90,000 toman (Iranian currency) in the open market. But the Iranian government used to give subsidised currency to their importers for the basmati import from India, who used to pass the same to Indian exporters. It was one US dollar equal to 28,000 toman. Now if at all after the war ends, the Indian exporters are worried that will they get their full payments back or not, as no one knows how much the currency will devalue further or not. Also, will the Iranian government be in a position to give subsidised currency?”
“Just few days before the Israel-Iran war, the Iranian government had given permission to import 2.50 lakh metric tonnes of basmati from India to their importers on subsidised currency and had given 90 days’ time to import the basmati, whose packaging had been started by the Indian exporters. But now all the packaging has been stopped and we are adopting a wait and watch policy,” he said.
Jossan claimed, “The basmati exporters have recently attended a virtual meeting of the Agricultural and Processed Food Products Export Development Authority (APEDA) under the Union Ministry of Commerce and Industry in which there was talk that the basmati export to Iran should be temporarily suspended. But no final decision was taken, as again the meeting is likely to be held on Monday. The reason was that Indian exporters were of the view that let us wait for a few days and watch how the situation develops.”
According to APEDA, India’s foreign exchange earnings from basmati rice exports were Rs 48,000 crore in 2022, out of which Punjab contributed at least 40 per cent.
An official said that exporters are adopting a wait and watch policy. “Of the Rs 6 billion basmati export, one billion goes to Iran. We are monitoring the situation, how it is panning out,” he said.
Jossan said, “Due to this crisis, the ripple effect is now visible. The prices have dropped from Rs 7,100 per quintal to Rs 6,200 per quintal, as the exporters were buying at this rate from the rice millers for export purposes. Also, the local domestic wholesale prices have fallen by Rs 9 per kg, from Rs 71 per kg to Rs 62 per kg. Thus, in the coming days, the retail prices might fall. Also, now the millers might also suffer a financial loss as the basmati stocks are lying with them and exporters will not buy them till the time the situation does not improve.”
Also, with Iran threatening to close the Strait of Hormuz — a vital trade artery — major shipping lines have suspended operations to Iranian ports. Thus, the insurance companies have reportedly backed out, unwilling to risk covering shipments through a war zone.
Export prices, once commanding between USD 850 to USD 950 per tonne, have seen a 10–15 percent drop. With the new basmati crop expected to arrive from mid-September, the situation is set to worsen. The farmers might also face the brunt, as now the paddy sowing season has started and if the situation remains the same or even if it improves, it will take time for exports to resume, thus causing a further decline in prices.
Farmer Sanampreet Mahrok of Fazilka district said, “We were hoping to get good prices, but under the present circumstances, the rates could fall by Rs 500 per quintal for both PUSA 1509, 1121, and other variants.”
R S Sachdeva, former chairperson of the Punjab chapter of the PHD Chamber of Commerce and Industry, said that if the same situation continues when the new crop arrives amidst an already saturated market, prices will crash further.