Indian merchants almost stop exports to Iran as rupee reserves deplete significantly. Exporters unsure of receiving payments on time for the new orders.
Indian Exporters Avoid New Contracts With Iran As Rupee Reserves Depletes
Indian exporters are avoiding signing new contracts for rice, tea and sugar exports to Iran. Tehran’s dwindling rupee reserves with Indian banks have raised concerns among Indian exporters. Vijay Setia, former president of All India Rice Exporters’ Association (AIREA), asserted that exporters received last year’s payment six months after shipment. Hence, this time exporters are being more cautious and avoiding new contracts with the middle eastern nation. A senior official with IDBI Bank confirmed depleting Iran’s reserves with Indian Banks.
India-Iran Sugar Trade
Rahil Shaikh, MD of MEIR Commodities India, explained that sugar exporters are exploring options to conduct trade in euros. Not only this, but they are also considering other sugar export destinations like Indonesia and Sri Lanka.
UCO and IDBI Bank are the only two authorized legal lenders which facilitate rupee trade. Iran used to fund its imports from India with crude oil sales. However, with the expiry of the US sanctions waiver, the country cannot sell crude oil to India. Hence, the delay in payments.
Exports To Iran Decrease Significantly
Iran fulfils more than one-third demand for sugar and rice from India. It imported around 700,000 tonnes of basmati rice from India during the first quarter of 2020. However, the number for the same was negligible in the same period this year. India’s exports to Iran fell 42% in 2020 from a year ago to $2.2 billion.
A senior official US sanction on Iran’s financial system has made payments very difficult.
In all, delayed payments from Iran and its decreasing rupee reserves have encouraged exporters not to sign new contracts. However, traders expect exports to rebound if the Biden administration provides concession like trading oil in rupees to Iran.
Source: Grain Mart India
