US-Iran standoff

Exporters halt basmati shipments to Iran on credit

To accept orders on advance payment, LC

Exporters halt basmati shipments to Iran on credit

Vijay C Roy

Tribune News Service

Chandigarh, January 8

Amid rising tensions in US-Iran relations and facing inordinate delay in payments, Indian basmati exporters, having exposure to Iran, today decided to export the aromatic variety only on advance payment or on letter of credit (LC).

Iran Biggest Importer

  • Last year, the exports to Iran were 34% of the total basmati exported from the country. During the last fiscal, India exported 44.14 lakh tonnes of basmati worth Rs 32,804 crore to different countries
  • During April-October period of the current fiscal, India exported 20.58 lakh tonnes of basmati worth about Rs 15,564 crore, of which nearly 5.22 lakh tonnes valued at Rs 4,005 crore went to Iran

Currently, India exports basmati under the mode cash against documents (CAD). Under this arrangement, the exporter first sends the consignment to the importer and then instructs the bank to hand over shipping and title documents to the importer when the importer fully pays the accompanying bill of exchange.

Iran is a big market for Indian basmati exports and constitutes nearly 30% of the total exports from the country. Amid tension between the US and Iran, the exporters are facing delay in getting payments from their respective importers.

“Indian basmati exporters are facing issues in getting payments from Iran. Though they have received Rs 600 crore in the past few months, which was pending since June last year, still around Rs 900 crore is pending,” said NR Gupta, president, All India Rice Exporters Association.

“In order to secure our payments, we have decided not to export basmati to Iran without letter of credit (LC) or advance payments,” he added. LC is a letter issued by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.

"In the current situation, we will issue as advisory to our members to be cautious and not to export without advance payment,” he said.

For exports, the exporters need to apply to Agricultural and Processed Food Products Export Development Authority (APEDA), which issues a Registration–Cum-Allocation–Certificate (RCAC). He said they would take up the matter with APEDA to issue directions to the exporters.

Last year, the exports to Iran were 34% of the total basmati exported from the country. During the last fiscal, India exported 44.14 lakh tonnes of basmati worth Rs 32,804 crore to different countries.

During April-October period of the current fiscal, India exported 20.58 lakh tonnes of basmati worth about Rs 15,564 crore, of which nearly 5.22 lakh tonnes valued at Rs 4,005 crore went to Iran.

Compared to last year, shipments to Iran have declined amid tensions and delay in payments. According to the exporters, till the exports to Iran were not streamlined, India’s overall basmati exports would suffer. Iran had imported 1.48 million tonnes of basmati from India in 2018-19.

The decline in exports will also result in less earning for the farmers of the northern region, as Punjab and Haryana account for over 70-75% of basmati exports from the country.

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