India rubs Iran the wrong way, rice farmers pay the price

Rice exporters and farmers are a sad lot these days. Their grouse is that Iran, the biggest buyer of their produce, has ditched them, for no fault of theirs. Iran, which used to impose an aromatic rice import duty of 10% earlier has now raised it to 45%. It has also started insisting on Good Agricultural Practices (GAP) certifications and ISO 2200 packaging protocols and low arsenic levels. A delegation of exporters, which visited Teheran in October, returned empty-handed.

So, why is Iran doing this?
Iranians are particularly riled that, last September, when they sought a meeting between their president Hassan Rouhani and Prime Minister Narendra Modi in New York on the sidelines of the UN General Assembly session, it was declined. PMO attributed it to scheduling issues, but sources say a meeting with an Iranian president ahead of Modi's meeting with Israeli prime minister Benjamin Netanyahu could have created a diplomatic ruckus. Earlier, Rouhani had invited Modi to Iran for talks. The invitation was handed over to external affairs minister Sushma Swaraj early September on the sidelines of a summit of the Shangahi Cooperation Organization (SCO) in the Tajik capital Dushanbe.

How much does Iran import from India?
Iran accounted for around 38% of India's total basmati rice exports. The country exported 3.7 million tonnes of basmati last fiscal. It declined to 4,23,431 tonnes in April-September 2014, which is about 30% of total basmati exports to Iran the previous year. The value of basmati exports in 2013-14 was Rs 28,187 crore. According to FAO, India's rice exports in 2014-15 are expected to decline by around 20%, with most of the decline in basmati rice to occur in key markets like Iran.

What about arsenic levels?
Rice exports to Iran are likely to decline further due to the phytosanitary and other restrictions. In July 2014, Iran increased the accepted level of arsenic in rice from 80 ppb (parts per billion) to 120 ppb. Moreover, the Enforcement Directorate investigation into UCO Bank's dealings with Iranian importers has also hurt exports.

How bad are farmers hit?
The impact is already being felt in Punjab, Haryana, Uttarakhand and Uttar Pradesh. Farmers in Punjab's Khanna mandi are realising just Rs 3,200 per quintal for Pusa-1121 basmati crop against Rs 4,100 last year. The Parboiled Pusa-1121 Basmati rice is currently said to be fetching about $1,100 per tonne (landed cost, West Asia), compared to $1,400-plus at this time last year.

Will domestic prices be affected?
Farmers had extensively grown Basmati, depending on the trend in the last three years. Basmati paddy production this year is expected at 12 million tonnes, up from 8.5 mt in 2013-14. "The slump in exports may bring down prices in the domestic market. That does not spell good for basmati rice producers," said Bal Krishna Mittal, MD, Gurdaspur Overseas Ltd, which deals in basmati rice. He wants the government to restore the Interest Subvention Scheme to avert a decline in rice exports and losses this year.