Indian rice exporters are likely to lose the advantage they have been enjoying for the last couple of years in the Iranian market after a landmark deal reached by Iran with global powers on its nuclear programme during the weekend.

“The monopoly we have been enjoying for quite sometime could end because of the nuclear deal,” said Vijay Setia, former president of All-India Rice Exporters’ Association.

Early on Sunday, Iran and six world powers reached a deal under which Tehran will curb its nuclear programme.

This includes diluting enrichment of uranium to less than five per cent and halting further progress of the nuclear fuel enrichment plant and the Arak reactor in Iran.

Led by the US, world powers have been asking Iran to curb its nuclear programme and a standoff led to imposition of sanctions on it.

They were imposed rigorously since last year with Iran’s banks, shipping and gas imports being targeted by the US and the European Union.

However, India won a waiver from the sanctions, agreeing to cut its oil imports slowly.

Along side, India and Iran entered into an agreement for a payment mechanism based on the rupee.

As an offshoot, Indian basmati exports gained along with other commodities such as soyameal and iron ore.

Iran buyers bought more rice this year to liquidate their credit balance in India that had increased to over $8 billion last fiscal. “Till now, India was the only supplier of rice to Iran though other origins were cheaper and had plenty of stocks. India enjoyed because of the payment mechanism. Indian basmati rode on this. But with food being covered in the deal, Indian basmati will have to turn competitive,” said R.S. Seshadri, Director of Tilda Riceland. The agreement reached on Sunday says that humanitarian trade will cover food and agricultural products, medicine, medical devices and medical expenses abroad.

India’s basmati exports increased to 20 lakh tonnes during April-September of the current fiscal against 17 lakh tonnes during the same period a year ago.

Of this, Iran accounted for 8.49 lakh tonnes valued at Rs 6,115 crore.

Higher shipments have resulted in basmati paddy prices increasing to over Rs 5,000 a quintal this year from Rs 2,500-2,700 a year ago.

On Monday, it was quoted at Rs 5,900-5,950 a quintal.

According to trade sources, demand from Iran was so high that some exporters mixed ordinary Permal variety with basmati in their shipments.

Riding on Iranian demand, Indian basmati is currently quoting at $1,500-1,525 a tonne, while Pakistan basmati is quoting $200 lower.

“The rupee business was an assured one for us. Now, when normal business resumes, competition will increase for us. We are already under pressure as the Iranian rice growers association has complained of excess imports last fiscal,” said Setia.

However, an executive with an Indian exporting firm, who did not wish to be identified, said Iran with a huge population is a big market for India.

Though rice is grown in Iran, there are not many takers for the domestically grown grain, resulting in demand for Indian rice, particularly Basmati, the executive said.

“The rupee is likely to come under pressure as Iranian money frozen in various parts of the world will find their way back home. It could also lead to some bargaining by buyers from Iran,” said a trader.

“Thailand and Pakistan could be the two biggest beneficiaries of this deal. Pakistan being Iran’s neighbour stands to gain a lot.

Thailand, on the other hand, is ready to offer its best rice at 40 per cent discount to India’s Pusa 1121 basmati,” said Seshadri.

May be it is a coincidence but on Monday an Iranian official complained that five varieties of Indian rice were contaminated.

subramani.mancombu@thehindu.co.in

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