The lack of an effective payment system has hit trade with Iran, which is the largest importer of Indian basmati rice and absorbs about one-third of this variety.
"Exports of basmati rice to Iran from India have seen a drop of 36% in April - August of this year compared to the previous year, largely due to stalled remittances,” said Vinod Kaul, executive director of All India Rice Exporters Association. “However, we have got positive indications on resolution of the payments issue against shipment since December 2019. Also, the Iranian government has opened its seasonal ban on imports a month in advance, which is good news for exporters."
The association has requested the government to work out a safe payment mechanism and see if it can permit third-party payment mechanism in dollar and UAE dirham.
India and Iran have been trading through a rupee account in UCO and IDBI Bank, but since May 2019, there was no inflow of funds in the accounts as there was no import of crude oil by India.
Exporters said that they are in talks with buyers in Iran and were expecting exports to pick up.
"We are waiting for the currency allocation by the Central Bank of Iran and the Indian government to guide us on which route to get the money. We should be signing contracts for January delivery soon, " said Satish Goel of Shree Jagdamba Agrico Exports.
Exporters said it was not easy to find new markets and drop in exports to Iran will make impact on other markets like Saudia Arabia, Yemen and Iraq.
Prices of export quality basmati rice are already 15% less than the previous year at Rs 46 a kg, which may increase once exports to Iran begins, said Goel.
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