Kolkata: India has been continuing to import crude oil from Iran despite imposition of trade sanctions on Iran. However, the Trump administration has recently withdrawn that waiver. As a result, there has been a great degree of uncertainties over India importing crude from Iran. It's not just import of crude from Iran that will be affected, but the move is likely to have wide ranging impacts.
For instance, analysts feel that the recent move by the US government can, skittle the exports of commodities, including Basmati rice. Given the scale of Basmati rice exports to Iran, a disruption in sales to this market can have a severe adverse impact on the Basmati rice industry.
The Modi government had been pushing for an extension of the waiver. However that has been to no avail. And the US government has recently announced that the waiver extended earlier will be withdrawn in the first week of May. In the eventuality of discontinuation of crude imports from Iran, payment recovery for exports of commodities like Basmati rice is bound to face high uncertainty. Interestingly, Indian crude oil imports from Iran were to the tune of Rs 70,000 crore in FY2018 against which total exports were around Rs 17,000 crore.
"Iran has remained a major export destination for Indian Basmati rice and the industry's concentration on Iran has only magnified in FY2019. Discontinuation of crude oil imports from Iran can lead to issues on recovery of outstanding dues for the Basmati rice shipments already made, hampering the financial position of such exporters. Moreover, this issue can impact the industry as a whole and even the players who do not export to Iran. Given the share of Basmati rice exports to Iran, any moderation in sales to this market can have a depressing impact on the Basmati rice prices globally," said Deepak Jotwani, Assistant Vice President, ICRA.
Jotwani said that this can severely impact the industry performance, especially considering that prices of the raw material, that is, Basmati paddy have firmed up in recent times, resulting in industry participants carrying high cost inventory. Additionally, the government's policy stance on trade with Iran, post withdrawal of the waiver, will have a strong bearing on the prospects of the Basmati rice industry in the current fiscal, he said.