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Journalism of Courage
A major hit to India from the uncertainty triggered by the assassination of Iran’s most powerful military commander could be to its multi-billion dollar basmati rice export industry. The Islamic republic accounted for $1.56 billion (Rs 10,790.02 crore) out of India’s total $4.71 billion (Rs 32,804.30 crore) worth of basmati shipments in 2018-19.
“We have already been facing payment problems from Iran due to the US financial sanctions on account of the latter’s nuclear programme. This news (the killing of General Qassem Soleimani by a US airstrike) may make things worse,” industry sources told The Indian Express.
Rice exporters alone are said to be stuck with receivables of Rs 800-900 crore against shipments made till June 2019.
“The outstanding dues had crossed Rs 1,300 crore at one point. They settled some payments, but we don’t know how things will pan out from here,” the sources noted.
The two nations have been carrying out trade through a special payment mechanism, under which Indian refiners make payments for import of crude from Iran into a rupee account with UCO Bank. This money is, in turn, used by Iran to import various commodities from India. Apart from basmati rice, India also exported tea worth $153.68 million (Rs 1,081.63 crore) to Iran in FY19. The latter has also become a major buyer of Indian soyabean meal — the volumes went up from a 22,910 tonnes in 2017-18 to 508,050 tonnes in 2018-19. Sugar mills, too, are looking at Iran as a potentially large buyer.
But this trade has suffered in recent months partly due to India stopping import of oil from Iran since May, following expiry of waivers from sanctions against Tehran granted by the US. “The barter deal mechanism worked well till they (Iran) had something to export to us — whether crude or urea — which would ensure sufficient balances in the UCO Bank account. Those balances started depleting once we stopped buying crude,” the sources pointed out.
Iran stopped buying Indian rice after June and started issuing fresh permits to importers only after November 22.
“We would have been able to export rice from the new crop (harvested after October) against these licences. But given the payment uncertainties, compounded by the latest developments, it is going to be difficult,” the sources admitted.
In 2019-20 (April-November), India has exported 23.64 lakh tonnes (lt) of basmati rice valued at $2.53 billion (Rs 17,723.11 crore), with Iran’s share in this at 5.91 lt and $643.18 million (Rs 4,489.64 crore), respectively.
