US-Iran tensions hit Indian basmati exports

Iran is the largest importer of Basmati Rice from India and in recent years, there has been difficulty in exporting basmati rice to Iran due to trade restrictions imposed by the Trump administration.

Hyderabad: India is one of the leading basmati rice exporters in the world. Recent slowdown in its exports is a matter of concern and need immediate policy interventions.

Basmati variety is majorly produced in Himachal Pradesh, Punjab, Haryana, Delhi, Uttarakhand and Uttar Pradesh.

Iran is the largest importer of Basmati Rice from India. Besides, Saudi Arabia, Iraq, UAE and Kuwait are also important export destinations.

Though the USA and European countries are not significant export destinations for the variety, they are important as overall aggregate export basket is considered.

US-Iran tensions

In recent years, there has been difficulty in exporting basmati rice to Iran due to trade restrictions imposed by the Trump administration.

Basmati rice export

In 2018-19, Iran accounted for nearly 1/3 rd of total basmati exports from India. In the current financial year, it is estimated that there would be a decline of at least 10% which is a major chunk going by the volume.

Some more problems -

1. The volatile geopolitical situation in major destinations for export of basmati, including Iran, Lebanon and Syria posing uncertainty over the trade prospects. Tighter pesticide residue norms making difficult for Indian Basmati Rice export to EU countries.
2. India’s output of basmati this year is expected to rise by 10% due to higher acreage, and that could suppress prices.
3. Saudi Arabia could press new trade regulations on the import of basmati.

The domestic stocks may increase mainly due to decreased exports of basmati rice to Iran. The surplus stock may adversely impact the domestic prices as well as prices for export of basmati rice to other markets which would ultimately impact the incomes of basmati growers.

What is the solution?

This issue can be strategically dealt with by adopting possible remedies such as diversification of export markets, value addition to the rice variety, expanding storage facilities, creating awareness in farmers about the judicious use of pesticides, incentives for good agriculture practices etc.

In order to double the farmers’ income, prices of rice have to be taken care of due to its prominent position in India’s agriculture sector. The government has to proactively work on various aspects of the present challenge so that the interests of the farmers and exporters will be protected.