Agri Business

Basmati rice exports value down last fiscal on Iran, pesticide issues

Subramani Ra Mancombu Chennai | Updated on June 03, 2021

Problems have been existing for quite sometime now, say trade analysts

Though Basmati rice exports increased by four per cent in volume last fiscal, the value of shipments dropped over seven per cent in value. Trade analysts and experts see the development as one that has been in the works for quite a while due to a slew of reasons.

According to the Agricultural and Processed Food Products Export Development Authority (APEDA), provisional Basmati rice exports during 2020-21 were 4.6 million tonnes (mt) valued at $4.01 (₹31,026 crore) billion compared with 4.45 mt worth $4.33 billion (₹29,849 crore).

A major reason for the seven per cent drop in the value is the per unit value of Basmati exports declining over 10 per cent to $868 (₹63,400) a tonne last fiscal ($972 or ₹71,000 in 2019-20).

Iran purchases

“There are several issues with regard to Basmati exports. Eighty per cent of our exports were heading towards the Gulf region with Iran buying a major portion of 34 per cent. But the last two years, Basmati exports have been hit by US sanctions against Iran,” said Vinod Kaul, Executive Director, All-India Rice Exporters Association (AIREA).

In view of US sanctions against Iran over the latter’s nuclear programme, Tehran is barred from using the US dollar to sell crude oil as is done in global trade.

India had been buying crude oil from Iran earlier and utilised the amount, deposited in UCO and IDBI Banks escrow accounts, for selling commodities such as rice, tea, sugar and drugs.

But India has stopped buying crude oil from Iran since May 2019 following intense pressure from the US, which refused to extend the special waiver for New Delhi for such merchandise trade.

This led to the balance in the escrow accounts shrinking and resulted in the banks telling their clients trading with Iran that exports could be done only if money is allocated for the deals and paid in advance.

“No money transfer has happened over the last few months. This led to a 51 per cent fall in Basmati rice exports to Iran last fiscal compared with 2019-20,” said Kaul.

APEDA data showed that Basmati rice exports to Iran declined to 0.65 mt during April-February last fiscal compared with 1.32 mt the previous fiscal. As a result, foreign exchange earnings on it slid to ₹3,831 crore (₹8,846 crore).

Consequent fall

Trade analyst S Chandasekaran, also author of a book on Basmati rice history, said that Basmati exports to the United Arab Emirates (UAE) have also declined in view of Iran's financial woes.

Basmati rice exports to the UAE have declined by over 60 per cent in the last five fiscals to 0.21 mt from 0.615 mt during 2016-17.

“The UAE is a small country but its cities such as Dubai are big trading centres. Basmati exported from India are re-exported in barges to Iran. So, no credible volume is going to that country. Sometimes, Basmati rice is shipped to even Syria from the UAE,” Chandrasekaran said.

The Iran payment crisis has resulted in many exporters going out of business and “the situation in West Asia is of serious concern”, he said.

AIREA’s Kaul said that payment problems have affected Basmati consumption even in countries such as Syria since consumers have also been affected badly.

Pesticide issue

But this is only one part of the problems that Basmati exports face, say traders and analysts.

Analysts point to a sharp fall in Basmati rice exports from Pakistan by 32 per cent in volume and 28 per cent value during July 2020-March 2021.

“Pakistan Basmati rice exports have been affected because of pesticide residue issues. The issue cropped up in Europe primarily but now, even countries in the Gulf are alive to it,” said Chandasekaran.

Issues such as sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) have rendered the Basmati rice regime more unstable and unpredictable, he said, adding that these issues have not been addressed by India and Pakistan despite both nations have a six years transition period from 2011.

“The pesticide issue is a serious one that the Centre has to tackle at the farm level. Unfortunately, the buck is passed on to the farmers when the issue has to be addressed by the pesticide producers,” says former AIREA President Vijay Setia.

According to Setia, countries importing Basmati rice are testing the shipments for over 20 residues but standard operating procedure is being developed only for a couple of them.

Crop protection biz

“Pesticide makers are getting away without any accountability. The responsibility has to be fixed and we need to look if farmers are forced to apply excess pesticide,” Setia, also executive director of Chaman Lal Setia Exports that sells basmati rice.

Chandrasekaran said that a report on endocrine disruptors was submitted to the European Union in 2008 and since then the crop protection or agri-chemical business has changed.

“India should have identified a different molecule and discussed the issue with the European Union and ensured that the barrier to exports did not get shifted to grounds of health,” he said.

India realised the gravity of the pesticide issue only in 2017 and a delegation went in August that year. “Actually, the issue took a serious turn in 2002 itself, but India failed to acknowledge it,” he said.

Tricyclazole and Bruprofezin are the chemicals that are now causing problems with regard to Basmati rice exports. Tricyclazole is a fungicide used for controlling leaf and panicle blast in paddy. The formulation is banned in the European Union. The fungicide is absorbed quickly by the paddy plant, which helps it overcome fungal attacks on the plant.

Buprofezin is an insecticide used to control pests such as mealybugs, leafhoppers, and whiteflies in crops. It is also an insect growth regulator. Both chemicals have been termed as harmful to humans.

‘Failed to act’

According to official sources, the Ministry of Agriculture and Farmers Welfare is developing “SOP for safe and judicious use of pesticides specific to use of Tricyclazole and Buprofezin”.

APEDA, on its part, is organising “sensitisation programmes for farmers towards good agricultural practices and judicious use of pesticides for export-oriented production of rice.

“When the EU came out with its findings and SPS notifications in 2011, India failed to realise the consequences. We should have addressed this issue at the beginning itself instead of ignoring it,” said Chandrasekharan.

According to trade experts, Basmati exports value are also being affected due to non-recognised varieties being shipped as the fragrant variety rice. “Over 2.5 mt of such unrecognised varieties, including Sharbati and Sugandha, are entering the Basmati export system, leading to wrong labelling and even adulteration,” alleged an expert, not wishing to identify.

AIREA’s Kaul denied the allegations and said only notified Basmati rice varieties were being exported.

Chandrasekharan pointed out that there were problems with Basmati rice exports since the value of the fragrant rice has increased by an average $60 a tonne only since 1991 when it was priced at $800.

“The Government has to attend to these issues and if required set right the lapses that are leading to depressed prices for growers. If the situation persists, growers might lose interest,” he added.

Published on June 03, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.