Iranian Gov’t Cuts Import Tariffs for Agrofood Products

The government has sharply reduced tariffs on the import of meat and agricultural products, including rice and sugar, to keep prices in check in the runup to the new Iranian year (starting March 21, 2017).

Based on a legislation passed by the Cabinet on January 21, tariffs on rice, butter, meat and bananas will be trimmed to 5% from 40%, 20%, 26% and 26% respectively.

The new regulation also sharply decreases tariffs on pulses. Lentils will be subject to 10% tariffs–down from the current 15%. Tariffs on various types of beans have also been reduced to 5%.

The legislation describes these commodities as “basic, essential and urgent", stressing that the move will take effect as soon as relevant bodies are notified.

“The legislation has been passed to control the prices of these commodities, which have increased in the past few weeks,” a source in the Agriculture Ministry told Financial Tribune via telephone on condition of anonymity.

“The president himself has issued a directive [to the Agriculture Ministry] to take necessary measures,” he said. “Usually, we do not impose low tariffs on these commodities.”

He said the tariff cuts are not permanent and high tariffs are expected to be reinstated after 2-3 months.

The administration of President Hassan Rouhani has often placed temporary bans on the import of rice and sugar, among other commodities, in support of domestic producers. 

The whopping 40% tariff on rice imports comes as the administration bans rice imports altogether during the harvest season. This year the ban was in place from July 21 to November 21.

According to the Ministry of Agriculture, Iranians consume more than 3 million tons of rice every year, of which almost 2.2 million tons are supplied by domestic farmers.

“This [domestic supply] does not suffice demand. We need imports, but imports that are limited and controlled,” Agriculture Minister Mahmoud Hojjati had said in November.

Figures show imports are on the risem despite all the restrictive measures.

Importers shipped more than 630,000 tons of rice valued at $527 million into the country during the nine months of the current fiscal year (March 20-December 20, 2016), which registers a 22% and 4% rise in volume and value respectively compared with the similar period of a year before, according to the latest data released by the Islamic Republic of Iran Customs Administration.

India is the biggest exporter of rice to Iran. Basmati producers recorded a loss in their stocks last year when Iran imposed the seasonal import restriction.

The cut in rice import tariffs is good news for Indian farmers who have been seeking to increase exports following the lifting of Iran’s seasonal ban on imports.

Indian newspaper Economic Times earlier reported that Basmati prices are on the rise amid increased Iranian demand.

“Basmati rice prices have started increasing, as Iran has allowed imports from India. A formal notification is awaited, but exporters and companies have started getting queries from Iran and some have even started signing contracts,” said Angshu Mallick, COO at Adani Wilmar Limited—Indian supplier of packed basmati rice.

India exported more than 4 million tons of rice in 2015-16, of which 1 million tons were shipped to Iran, the report says, adding that this year, the industry expects exports to decline to 3.8 million tons, due to limited exports to Iran.

As for sugar, chocolate and candy industries have been complaining in the past few months that the commodity was scarce due to restrictive regulations regarding imports.

“Chocolate and candy factories, which are in dire need of sugar, are on the verge of closure,” Jamshid Maghazei, an official with the Association of Iranian Confectionery Manufacturing Companies said in July. Voices of discontent were heard throughout the summer. 

The claim was ruled out by the government. Hassan Abbasi, the deputy head of state-owned Government Trading Corporation of Iran, which is tasked with importing basic commodities for strategic reserves, said Iran’s sugar reserves were sufficient to meet domestic demand. 

“The government has no problem in feeding factories and controlling prices in the market.” 

Periodic bans on sugar imports are imposed mostly to prevent oversupply and support local manufacturers. 

According to Iran Sugar Association, Iran is currently 70% self-sufficient in sugar production and a complete self-sufficiency is possible within the next four years.  

Sugar production is estimated to exceed 1.52 million tons by the end of the current fiscal year (March 20, 2017). 

“Domestic demand for sugar stands at 2.2 million tons annually. Therefore, the import of close to 700,000 tons is needed,” an official with the Ministry of Agriculture, Alireza Yazdani, has been quoted as saying. 

The government also imports a few hundred thousand tons for its strategic reserves every year.

In its latest report on Iran’s agribusiness, Business Monitor International forecast domestic consumption to reach 3.1 million tons by 2020, noting that demand will be mainly driven by population growth and improved macroeconomic conditions following the lifting of sanctions in 2016.