Rice imports over the first five months of the current Iranian year (March 20-Aug. 21) have declined by around 48%, according to Secretary of Iran’s Rice Importers Union Masih Keshavarz.
The official blames the decline in the import of this staple food on the policies of the Central Bank of Iran, adding that CBI insists on allocating forex at the secondary foreign exchange market rates to rice imports but fails to deliver, the news portal of Iran Chamber of Commerce, Industries, Mines and Agriculture
Known by its Persian acronym, Nima, the secondary market is a trade platform where exporters sell their forex earnings (at rates lower than market prices) and importer buy it for import needs.
Since March 20, the government has discontinued the allocation of foreign currency at the subsidized rate of 42,000 rials per dollar for importing rice.
It has instead called on importers to meet their forex requirements from the export earnings of non-oil products (petrochemicals, steels and minerals) traded through the so-called secondary FX market that has exchange rates much closer to the free market rates.
“At present, a total of 200,000 tons of rice in Iran's customs warehouses are awaiting clearance procedures once the required foreign exchange is allocated to the consignments. With the CBI delay in providing forex to importers, we are currently facing shortage and price fluctuations in the domestic market,” Keshavarz said.
The CBI does not allow importers to use their own foreign currency, in or outside the country, to import goods, due to transparency issues.
Keshavarz noted that since lower income deciles of Iranian population consume foreign rice (of lower quality compared to premium Iranian rice), the government should think of ways to ease its import.
As per the decision made by the Market Regulation Headquarters in June, customs duties on rice imports have decreased from 25% to 10%, Fars News Agency reported.
The decline in import duty of rice is aimed at preventing a surge in its prices.
Rice is a staple food in Iran. Iranians consume 3.2 million tons of rice per year. Annual domestic production amounts to around 2.2 million tons, but last year the figure increased to 2.9 million tons, registering close to a 45% increase compared with the previous year due to favorable weather and high precipitation levels.
The northern Gilan and Mazandaran provinces together account for 71% of Iran’s rice production, according to figures released in a recent report published by the Statistical Center of Iran.
The main exporters of rice to Iran are India, Pakistan, the UAE, Thailand, Turkey and Iraq.
Indian Exporters Concerned About Iranian Orders Placed With Pakistan
Iran has started placing orders with Pakistan for basmati rice, raising concerns of Indian basmati rice exporters who have stalled exports to the Persian Gulf nation due to non-payment of their dues worth 1,700 crore rupees. However, exporters see this merely as a temporary blip, The Economic Times reported last month.
“Yes, we have heard that Iran has placed some order with Pakistan recently. It is nothing unusual. However, Pakistan exports 6 lakh tons of basmati rice in the world markets whereas India’s exports stand at 4.4-4.5 million tons,” said Vinod Kaul, executive director of All India Rice Exporters Association.
Kaul said that it is a temporary phenomenon and once Iran clears its dues, India will again start exporting to Iran that accounts for 34% of India’s basmati exports to the overseas markets.
The association official said exporters are anxious about when they get their money back.
“They are extremely worried. Also, if Pakistan gradually increases its presence in Iran, then may be in the long term, it may create some problems for Indian exporters,” he said.
A Crisil study has stated that Iran, which imports around 1.3 million tons of basmati rice annually, is expected to register a 20% lower volume from India as payment-related issues continue from the last fiscal year because of US sanctions.
India and Iran have been discussing the barter trading system for nearly a year now, ever since the US administration began imposing tough economic sanctions on Tehran.
Iran has said it will buy basmati rice, sugar and medicines from India in lieu of fertilizers. A final decision is yet to be taken.
Exports with Iran need to be resumed soon, as basmati production is expected to be higher this year. In the last crop season, India produced 7.5 million tons of basmati rice.
“This year, the acreage has increased and we are expecting 8 million tons of rice,” said Kaul.
Gurnam Arora, joint managing director of Kohinoor Foods, said Pakistan has been sending basmati rice to Iran through some convoluted business route.
“The payment was being made in cash. But with India, Iran has a transparent business model. The buyers may have placed some order with Pakistan to meet temporary demand. This will in no way impact Indian exports going ahead,” he added.
Arora noted that Iran’s own crop will start coming by October and then the country will not require imported basmati.
“Indian basmati is superior than basmati from our neighboring nation,” he said.
