Chandigarh: The latest conflict in the Middle East has come as a bolt from the blue for basmati rice exporters in Punjab and Haryana, which together account for nearly 80% of India’s basmati exports. Iran, the largest buyer of Indian basmati rice, has been at the centre of the conflict involving the US and Israel.There are reports that movement through the Strait of Hormuz — a critical sea link for India’s oil imports and basmati exports — could be restricted amid the ongoing unrest in the region. The latest crisis has unfolded against the backdrop of a downturn in exports to Iran due to geopolitical tensions between the US and Iran in the recent past, as well as the depreciation of Iran’s currency. In fact, it has come at a time when exporters from the two states were readying shipments of nearly 140,000 tonnes of basmati to Iran.Iran’s state trading body, the Government Trading Corporation, recently issued purchase instructions for about 160,000 tonnes of Indian basmati rice. Trade insiders say that of this quantity, Punjab exporters alone were preparing to ship 90,000 tonnes, while the remaining consignments were to come from other parts of India, including 50,000 tonnes from Haryana.“However, after the outbreak of war, uncertainty has deepened. Exporters are hesitant to dispatch consignments without secure payment guarantees. Large shipments risk getting stuck at Indian ports, which could put pressure on domestic prices,” said Ranjit Singh Jossan, vice-president of the Basmati Rice Millers and Exporters Association, Punjab.Jossan warned that the rising conflict could create market instability. “In the early phase, stockists may book profits, leading to temporary price declines. If crude oil prices rise sharply, processing and transportation costs will increase, making exports more expensive. At the same time, if exports slow or stop, domestic prices in India may soften for a short period,” he added.Iran has historically been one of the largest buyers of Indian basmati. After the commercial release of Pusa Basmati 1121 by the Indian Agricultural Research Institute in 2003, and its official notification in 2008, exports to Iran increased sharply. At one point, shipments reached nearly 1.5 million tonnes per year, significantly altering farming patterns in Punjab and Haryana.Due to rising tensions in Iran, coupled with currency depreciation and market volatility, direct shipments from India had already slowed in recent months. Exporters were relying on the older route through Jebel Ali Port in Dubai, from where smaller vessels carried goods to minor Iranian ports. Trade sources say nearly 300,000 tonnes of basmati were shipped to Iran through this route in the past three months alone.“Now, concerns are growing over banking restrictions, delays in international payment settlements, and rising risks in the Red Sea and the Strait of Hormuz. Freight and insurance rates are expected to rise. Several global shipping lines have reportedly instructed vessels to halt or avoid certain ports,” said Jossan.Jossan said exporters were wary of how the Middle East crisis might unfold. “Exporters are concerned. What if there is a regime change in Iran? They are worried about how it will play out in terms of payments,” he said.In view of the crisis in Iran and parts of the Gulf, the Indian Rice Exporters Federation (IREF) on Sunday issued an advisory asking members not to undertake new CIF (cost, insurance and freight) commitments for these destinations and, wherever feasible, to conclude sales on FOB (free on board) terms so that freight, insurance and related risks remain with the international buyer.“Developments in Iran and the United Arab Emirates can have an immediate impact on bunker (ship fuel) prices and, if oil prices rise, may also disrupt container and bulk vessel availability. In such circumstances, container and bulk freight rates could increase sharply at short notice, exposing exporters to losses on fixed delivered-price contracts. The situation may also lead to a steep increase in insurance premiums,” the IREF advisory stated.However, Jossan said the immediate concern was not new commitments. “It is about old commitments where agreements were already signed with buyers. There can be no change in those agreements, or it will amount to a breach. No one can think of entering into any new agreement with a buyer at this stage,” he said.
