Indian Rice Exporters Gauging Impact of Anti-Iran Sanctions

They are keen to trade in euro or any other currency, if the dollar trade stops following the sanctions.

Iran is a big market for Indian basmati rice. Indian exporters fear they may lose the Iran market, The Economic Times reported.

“Iran is a big market for basmati rice. At present, there is a lot of confusion in the market on what will happen after US sanctions. Our government is in talks with Iranian government to avoid US sanctions and do business smoothly. We are hopeful something will emerge soon. Exports are still going and the trade is on a wait and watch mode,” said Gumnam Arora, joint managing director, Kohinoor Foods.

At present, according to Financial Tribune, basmati rice fetches $1,200-1,300 per ton in the world market. India exported 0.87 million tons of basmati rice to Iran in FY18 and total exports stood at 4.05 million tons.

In the current fiscal, traders are hopeful of exporting 1 million tons of basmati rice to Iran.

“The situation is not that bad now, as UN has not imposed sanctions on Iran. The US sanctions can only affect dollar trade. In that case, euro or other local currencies can be used for trading. European nations have not imposed sanctions on Iran. Only dollar is eliminated,” an Iranian trader said.

“Also, we have to see whether there are sanctions on food items. If there are no sanctions on food items, then there will be no worry for Indian food item exporters.”

Indian exporters mostly receive payments in rupees for exports to Iran under a mechanism worked out in 2012 when banking channels were restricted due to the US sanctions. Indian companies receive payments for exports to Iran using the oil payments held in rupee balances at Kolkata-based UCO Bank.

The mechanism helped India narrow its trade deficit with Iran from about $11.3 billion in FY12 to about $3.5 billion in FY16 when the sanctions were lifted.