India trumps Pakistan's Iran rice trade boom with oil rupees
(Reuters) Iran's oil export revenues are helping Indian rice exporters to claw back some of the lucrative business lost to cross-border truckers in Pakistan as a result of Western sanctions. Indian rice exports direct to Iran have bounced back, thanks
to shippers being paid up front in rupees from a huge pool of oil money owed to Iran by Indian refiners.
“Now business is being done directly because Iran is allowed
to open letters of credit in Indian rupees because the government has to pay money to Iran for the oil,” said Suresh Manchanda, marketing director of a Delhi-based company which exports rice, wheat and sugar globally.
“For the importers back in Iran, Indian rupees are easily available to them via the government, so they can do business in a much easier way than doing business in
any other currency,” Manchanda told Reuters at the Gulf Food trade show in Dubai. “For all practical purposes the money never leaves anywhere, the money is already in India.” India is Tehran's biggest rice supplier but shipments were held up in early 2012 after Iranian buyers defaulted on payments. Many Indian suppliers then stopped sales on credit.
Tightened sanctions on shipping and bank transfers between
Iran and India started a boom in Pakistani rice trucked across the remote border into Iran by groups based in Quetta, grains traders from Pakistan and India said at the world's biggest food show last week. Problems getting paid by private Iranian buyers hit by a slide in the value of the rial also saw the rice flow from India being routed through Dubai, with wholesalers there taking on the payment risk in return for a mark-up.
Before Western sanctions aimed at stopping Tehran's disputed nuclear programme began to bite, Indian official data show rice sales to the Islamic Republic were surging.
They more than doubled in the financial year of 2009-2010
and also rose in value by nearly 35 percent to over $600 million from April 2011 to the end of March 2012, but this was a period when India's overall rice export earnings almost doubled in value globally. Dubai's role in the India-Iran rice trade has withered since oil pool payments started.
From April 2011 to the end of March 2012, $821 million of Indian rice was shipped to the United Arab Emirates, more than anywhere else. But in just nine months from April to December last year Iran imported over $725 million of Indian rice, up 20 percent on the previous 12 months, while Indian exports to the UAE slumped to $287 million, official figures show. There is effectively no limit to how much Indian rice exports to Iran can be funded by the oil money pool, because even when India's oil imports from Iran fell more than 40 percent from January 2012 to 2013, their value was still nearly $1 billion in one month. “The new payment mechanism has been helping Indian rice exporters. Competitors in Pakistan don't have any such facility,” M P Jindal, president of the All India Rice Millers Association said.
“This year we are estimating at least a 10 percent rise in basmati rice exports. Exports are booming, especially to Iran and Iraq.” Pakistan exported around 30,000 tonnes of rice, worth $21million, directly to Iran in the second half of 2012, a sharp fall from the 12 months to the end of June 2012 when sales approached 140,000 tonnes, according to the Rice Exporters Association of Pakistan (REAP).
Pakistan's rice sales to the UAE, the main shipping route into Iran, also dropped sharply to less than 52,000 tonnes in the second half of 2012, compared to nearly 228,000 tonnes in the previous 12 months, REAP data showed.