Indian basmati rice exports to Iran, which accounts for a quarter of the total market, have been hit by inordinate payment delays as war clouds gather in the horizon, exporters said.
Total payment of around Rs 1,700 crore are stuck as Iranian authorities have not released payment orders for buying Indian basmati rice.
Out of this around 125,000 tons of Indian basmati have already been shipped to Iran, while another 50,000 tons destined for Iran are lying at Indian ports, said Vijay Setia, president of All India Rice Exporters Association .
Under a barter trade arrangement with Iran, payments due for Iranian crude sales to India–parked in two Indian bank accounts–are used for payments to Indian exporters of various goods including basmati rice. The ingenious payment mechanism has been in use for several years as Teheran has been repeatedly subjected to western sanctions, affecting payments via international channels.
“Iran is taking its own sweet time now with releasing payment orders,” said Setia. “If they want to change the payment policy, they can’t do so suddenly,” he added.
While Iran has so far not explicitly stated the reason for the payment delay, New Delhi has been forced to halt crude shipments from Iran since May as the US has ended sanction waivers to India and 7 other countries for buying Iranian oil.
The payment snag has cropped up even as Iranian importers have stepped up shipments in recent weeks to stock up amid fears that war could break out with the US or other Middle East nations, following attacks on tankers and oil facilitied near the Straits of Hormuz — the shipping lane that accounts for around 20% of crude oil trade.
Gurnam Arora, joint managing director of Kohinoor Foods, said that he was optimistic the payment problem would be resolved and shipments would resume normally as rice is an essential food and Iran does not grow enough to be self-sufficient.
Shipments to the rest of the Middle East region are going through smoothly, despite tensions in the region, Mr Arora said. A stronger US naval presence in the region has sparked fears that Indian shipments may be subject to inspections, possibly impeding flow of rice cargoes for a bulk of the trade. India exported a total of 4.4 million tons of basmati rice in the financial year ended March. While early indications are that the country’s total basmati output may be higher this year, exports are likely to be stagnant at around last year’s level, industry officials said.