Basmati exporters grapple with Iran conflict; Pakistan benefits via barter trade

Time of India

15-06-2025

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Chandigarh: Rising tensions between Iran and Israel have cast a long shadow over India's basmati rice exports, with exporters warning that any disruption to shipping through the Strait of Hormuz could cripple trade with Gulf countries and hand long-term strategic advantage to Pakistan.
At the heart of the concern is the possible closure of the Strait of Hormuz — a vital maritime chokepoint through which almost 30% of global crude oil and 20% of natural gas pass. Indian exporters fear that an escalation in conflict could force ships already en route to turn back, leading to steep financial losses. "If the basmati consignments do not reach their destination, it will mean a huge loss for us," said Ranjit Singh Jossan, vice-president of the Punjab Basmati Rice Millers and Exporters Association.
Iran is one of India's largest basmati buyers, accounting for more than 8.55 lakh metric tonnes in the year 2024–25, valued at ₹6,374 crore. This represents 30-35% of India's total basmati exports in peak years, with Iranian consumers preferring Indian rice for its aroma, grain length and flavour. However, delays in payments from private Iranian traders — often ranging between six to eight months — have strained Indian exporters' working capital.
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Even state-affiliated buyers such as the Govt Trading Corporation (GTC) have taken up to 180 days to process payments, prompting some Indian exporters to redirect their shipments to lower-margin markets.
Amid this uncertainty, Pakistan has moved swiftly to gain ground in Iran. Leveraging a shared land border and the absence of formal banking restrictions, Pakistan has engaged in barter trade with Iran — exchanging rice for petroleum, copper and electricity.
Its advantage in logistics and payments has allowed it to consolidate market share, filling the void left by India's constrained position. "India should not let Pakistan capture a market where we have held cultural and culinary primacy for decades," said Jossan.
"Regaining that lost ground may take years, if not decades."
The roots of India's declining trade with Iran date back to 2019, when US sanctions prompted India to halt crude oil imports from the country.
The collapse of the previous rupee-rial oil payment mechanism severed a critical channel for Iranian buyers to fund Indian imports, including basmati rice and pharmaceuticals.
The ripple effects are being felt again this year. Cargo insurance premiums through the Red Sea and Persian Gulf have jumped by 20%, increasing costs for exporters. Analysts warn that further disruption in maritime trade could temporarily drive up basmati prices in Gulf countries by 5-15% and trigger inflation-mitigation measures such as subsidies or tariff adjustments by regional govts.
In Punjab, growers and traders remain on edge. A similar flare-up in 2023 had already led to reduced orders and a sharp fall in the price of Basmati 1509, a key export variety. As India's strategic grip on the Iranian rice market loosens, exporters argue that a recalibration of trade policy is urgent. Without it, they warn, India risks losing not just revenue but also its longstanding cultural and commercial ties to a key consumer market.
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