• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books
• Gallery

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Kamal Narang

Cropping woes: Workers cleaning Pusa-1121 basmati paddy at the Panipat mandi in Haryana before auctions in the market yard. –

Harish Damodaran

New Delhi, Nov. 2 Basmati exporters who had contracted large purchases from Iran at highly attractive prices till a couple of months ago are facing payments problems to the tune of Rs 700 crore or more.

Trade sources say that at least 50,000 tonnes of par-boiled Pusa-1121 rice that was contracted for exports during June-August are currently lying unshipped at Kandla.

Further, there are no takers even for consignments already despatched, with some 50,000 tonnes stuck in Dubai and another 30,000-40,000 tonnes at Iran’s Bandar-Abbas port. In addition, an estimated one to 1.5 lakh tonnes (lt) of unsold stock are believed to be held by traders in Iran, unable to pay up fully for the material they are yet to dispose of.

During June-August, Indian exporters shipped out around 2.6 lt of Pusa-1121 rice. These were contracted at an average $1,400 a tonne (cost and freight Dubai/Bandar Abbas), with a few consignments going for above $1,600.

Pusa-1121 export prices have been rather volatile over the past one year, starting at $1,000-1,110 a tonne last November and touching $1,600-1,700 by January and then crashing to $850-900 in March. Subsequently from June onwards, they resumed their upward climb to cross $1,400-plus levels by end-July, which was also the period when Indian exporters contracted huge orders from Iran. Then came the controversy over Iranian allegations of basmati shipments being tainted with heavy metals, bringing trade to a standstill.

To make matters worse is the bumper Pusa-1121 crop being harvested this time, leading to new contracts being entered for $900-950 a tonne. “Farmers were encouraged to plant more area as they had seen paddy prices touch Rs 3,500-3,600 a quintal. And that, in turn, was a reflection of exporters’ realisation of $1,600-1,700 a tonne,” the sources said.

But with export prices crashing, farmers in Punjab and Haryana are having now to offload their crop for Rs 1,700-1,800 a quintal. The exporters, on their part, are saddled with huge payments outstanding from Iran buyers, who have apparently issued post-dated cheques that have bounced in some cases.

“There was overtrading from both sides. The Iranians bought like never before, while Indian exporters supplied on virtually unsecured credit. This was a kind of positive feedback loop that drove up prices,” sources pointed out.

At $1,400 a tonne, the 2.6 lt of rice exported during June-August would have been valued at about $360 million or Rs 1,700 crore. “Out of this, only 50-60 per cent would have actually been paid so far, leaving outstandings of over Rs 700 crore,” according to the sources.

Indian exporters, it is learnt, are now being forced to renegotiate past contracts for $1,400-plus and take “haircuts” of $400-500 to reflect current prices of $900-950 a tonne.

“They have little alternative because these are people who would be importing in the future as well. And the brunt of all this is, of course, being borne by the farmer,” the sources said.

There is hope, however, of Iranians resuming buying after January, when the existing inventories would have run out. “They need to import 8 to 10 lt of rice annually, which only we can supply. So, prices are bound to recover some time again,” they added.

More Stories on : Rice | Exports & Imports

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2009, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line