Since March 20, the government has discontinued the allocation of foreign currency at the subsidized rate of 42,000 rials per dollar for importing rice. It has instead called on importers to meet forex requirements from the export earnings of non-oil products (petrochemicals, steel and minerals) traded through the so-called secondary FX market that has exchange rates closer to the free market rates.
The decline in rice import duty aims to prevent a surge in prices; 1 kilogram of Grade A imported rice was sold at 119,863 rials ($0.67) during the month ending May 20, registering a month-on-month increase of 16% and a year-on-year growth of 34%, the Statistical Center of Iran reported.
A kilogram of Grade A Iranian rice was sold at 250,225 rials ($1.4), indicating a 4.5% increase month-on-month and a 21.4% growth year-on-year.
The latest report shows there are hundreds of thousands of tons of rice piled up at country’s customs due to complications associated with the provision of foreign currency.
“The Central Bank of Iran will shortly provide importers of 500,000 tons of rice piled up at the country’s ports with foreign currency they need to collect their goods at the Nima rate, the so-called secondary FX market,” Masih Keshavarz, the secretary of Rice Importers Association, said recently.
According to the official, the market will settle into equilibrium as supply and demand balance each other once the customs clearance procedure has been completed.
Noting that CBI’s procrastination in supplying forex would create new problems for importers, Keshavarz said, “That’s why we have asked the Ministry of Industries, Mining and Trade to warn CBI against the trickling supply of foreign currency for traders,” ILNA reported.
Following the re-tanking of the national currency in early 2017, the government introduced stringent rules like banning the import of non-essential goods, especially those produced inside the country (known as Group IV goods). It allocated subsidized currency at the rate of 42,000 rials to a dollar to 25 categories of goods (also known as Group I or essential goods) to help protect consumers against galloping inflation, rampant price gouging and hoarding, not to mention the high and rising cost of living.
Two other categories of imports were also defined: Group II, which mostly included raw materials, intermediate and capital goods, and Group III consisting of essential consumer goods.
Importers of products in Group II were to meet their forex requirements from the secondary forex market. Importers of goods in Group III could buy hard currency from exporters who were not required to offer their forex earnings on Nima.
In the last fiscal year (March 2019-20), the government removed five items, namely red meat, butter, pulses, tea and sugar, from the list of essential goods entitled to subsidized currency.
Vegetable oil, oilseeds, corn, barley, soybean meal, raw materials for manufacturing tires, heavy-duty vehicle tires, paper pulp and different types of paper are still considered essential goods.
The decision to discontinue the allocation of subsidized foreign currency for rice imports comes as domestic rice production has reached levels, officials say, that breaks Iran free from the need to import rice amid abundant rainfalls this year (started March 20).
A total of 2.9 million tons of rice were produced in the country during the last Iranian year (March 2019-20), registering close to a 45% increase compared with the previous year, according to the director general of the Ministry of Agriculture’s Grains and Essential Goods Bureau.
“This increase in rice output owes to the favorable weather and heavy precipitations during February and March of 2019, due to which the land under rice cultivation increased by 38% to reach around 834,000 hectares,” Faranak Aziz Karimi was also quoted as saying by IRNA.
Latest figures released by the Statistical Center of Iran show per capita rice consumption in the country stands at 35 kilograms.
The northern Gilan and Mazandaram provinces together account for 71% of Iran’s rice production, according to figures released in a recent report published by the Statistical Center of Iran.