Indian traders urge payment mechanism with Iran to improve record basmati exports

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India’s basmati rice exports are set to touch a record 5 million tons in 2020/21, which could potentially increase still further if the government and state-run agencies are able to resolve a payment snag with key consumer Iran, Vinod Kaul, executive director of the All India Rice Exporters Association said Tuesday.

Speaking at a meeting organised by APEDA (Agricultural and Processed Food Products Export Development Authority (APEDA), said that the pandemic-related disruptions has turned out to be a blessing as India has been able to establish itself as a reliable exporter of rice during the period.

India is the world’s second-largest rice producer and the largest exporter of the grain with annual shipments estimated at $4 billion to 160 countries. Production this year is expected to hit a record this year due to bountiful monsoon rains.

Kaul said that the exports of the premium, fragrant basmati rice could easily reach 5.5 million tons during the current fiscal year if the export problem with Iran was resolved.

The share of the Middle East nation is expected to drop to 16% from 34% of India’s total basmati exports as US sanctions have disrupted a barter trade arrangement between the two nations.

“I don’t know whether the election of Joe Biden (to the post of US president) will help, but we want a third-party payment mechanism to be put in place,” he said.

Traditionally, Iran would export crude oil to India, which would set off exports of basmati rice from the South Asian nation under a barter arrangement. But US sanctions have resulted in India stopping its oil imports from Iran, which has in turn affected rice exports.

Since Iran’s central bank is not permitting use of foreign exchange to buy Indian rice, trade in the commodity between the two countries has been hit hard.

Shortage of containers

Kaul said that rice shipments from the country are also being limited by a shortage of containers as exports from China have been affected due to recent border tensions. India has started clamping down on imports of Chinese goods, which has also affected the availability of containers for Indian exports.

Despite India’s position as the top-ranked rice exporter, India was yet to achieve its full potential in exports of basmati rice exports, government officials said.

Shubhra, trade advisor to the Ministry of Agriculture, said that the potential earnings from export of basmati rice could increase multiple times id Indian traders worked with farmers by developing a common platform to promote the cultivation of organic grains.

She added that India currently had less than 1% of the $100 billion market for organic agriculture produce, out of which most of the exports from the country were of oilseeds.

“Organic has a lot of potential, but it will be upto traders to give confidence to the farmers that there will be buyers for their produce,” she said.

“Similarly, traders have concerns whether the farmers will be able to sufficiently large quantities that they can commit to international buyers.”
These issues need to be resolved so that the trade could develop to its potential, Ms Shubhra noted.

Processes to be streamlined

Diwakar Nath Misra, joint secretary in the ministry of commerce, said that the agriculture processes need to be streamlined so that farmers start growing basmati rice without the use of pesticides. 

“As a community, we don’t have the killing spirit to promote our basmati rice exports. We need to discuss with farmers and build up greater sensitization,” he said, adding that a rival rice exporter had started producing high-quality organic rice for exports.

Misra said the focus has to be on high-quality produce that caters to world markets.

Dr A.K Singh, director Indian Agriculture Research Institute (IARI) said that the nation’s farmers are capable of producing large quantities of organic basmati similar to ones using fertilizers and crop protection chemicals, though the process is longer and more arduous.

He said vermicompost–produced by earthworms –can provide sufficient quantities of nutrients to crops that can protect crops from pests. Besides, an array of organic pesticides and cultivation methods have been developed in the country which can help the transformation towards organic rice production.

Biman Mukherji is a columnist and consulting editor at Indoasiancommodities.com. He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at biman.mukherji@indoasiancommodities.in

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