Events of the last four months confirm that Iran is not keen to buy Indian wheat. It appears that Iran's estimated demand for three or four million tonnes of Indian wheat is an overestimation.
The lack of demand for Indian wheat is due to sanitary and phyto-sanitary issues, and not disparity in prices.
Since February 2012, Iran contracted about three million tonnes (mt) from its preferred origins — US, Canada, Australia, Russia and Kazakhstan — despite a rupee payment mechanism agreed on a bilateral basis. (On humanitarian grounds, US sanctions are not applicable on food supplies to Iran.) India's wheat exports were freed in September 2011 (after prohibition in 2007) and have touched 0.9 mt, mostly to the Middle East Bangladesh, with nothing to Iran. Iran buys Indian rice, tea and soyameal — but not wheat. Iran's GTC (Government Trading Corporation) generally imports 2 million tonnes of wheat per annum, barring exceptional years like 2008-09 when peak tonnage touched 8 million tonnes. The last Indian wheat deal with Iran was executed in 1996 under the Asian Clearing Union (ACU) system. Though India exported about 14 million tonnes of wheat in 2001-05 at the cheapest prices globally, to the geographical arch from S. Korea to Yemen, not a single tonne was sourced by Iran.
EXAGGERATED FEARS
Iran's NPPO (National Plant protection Organisation) has embargoed Indian wheat due to the presence of
Though Iran itself has KB, this phyto-sanitary issue has inhibited the bilateral wheat business. KB can adversely affect yield when it is a part of seeds used for sowing. But it will have no implication for milled flour when present in insignificant percentages.
The existence of ‘Striga species' has been completely ruled out officially by Indian authorities. KB, too, is absent in the central and western Indian crop, while its negligible presence in the North West has had no impact on Indian wheat production, which increased from 48 million tonnes in 1990 to 91 million tonnes in 2012.
Indian plant quarantine authorities cannot issue a ‘nil' certification for KB, and any marginal tolerance has to be defined in quality terms. The ghost of KB has, however, not affected private exports to other quality-conscious countries, as the shipped grain is used for milling, and not for seeding.
India relaxed some SPS issues over “weeds” in US, when it imported six million tonnes in 2005-2007. The US had responded by lifting the ban on Indian mangoes. Can't the same approach be applied in the case of Iran?
ZERO TOLERANCE PROBLEM
Resolution of the current SPS conciliation with Iran also requires political will at the highest level, rather than discretionary decision-making by plant quarantine authorities.
Certification like “wheat not sourced from KB regions” or “substantially free from KB” or with “maximum limit of 0.2 per cent” can be agreed upon. But “zero tolerance” can expose Indian shippers to arbitrary rejection of cargo. Pakistan may have also failed to sell wheat to Iran due to similar stringent requirements.
Why has Iran not relaxed SPS conditions since 1996? Why did Iran not procure any wheat from India in 2001-05, despite prices then being the lowest?
The reason is that well-entrenched traders of US Australia and EU zealously guard their markets. These countries do not pursue flip-flop, “on and off” export policies. In 1996, Indian cargo met with resistance from these origins.
Now, they can blow out of proportion a non-issue like KB in Iran, scuttling any favourable decision for India. Recently, India gifted 100,000 tonnes of wheat to Afghanistan via the Iranian south-eastern port of Chabahar. Since Afghanistan is terribly short of milling capacity, the bulk of flour production may have been carried out in Iran on behalf of the Government of Afghanistan. This is in a small way an acknowledgement of Indian wheat being imported via Iran without any negative implications. The added advantage of export of wheat to Iran in break bulk cargoes through Chabahar port, will also facilitate or enhance India's wheat trade with Afghanistan in the long term.
Iranian insistence of zero tolerance for KB is inconsistent with the use of wheat for milling. India consumes 80 million tonnes as flour annually, and KB has never been an issue. All American/foreign food chains operating in India, like Pizza Hut, McDonalds, Pepsi foods, Hindustan Lever (subsidiary of Unilever), Britannia Breads, and so on, use Indian flour without any reservations.
Meanwhile, some precautions for ensuring enhanced quality of wheat flour can be agreed upon. Iran is dragging its feet on the KB matter, while meeting its needs from elsewhere. We must seek to settle the issue at the earliest, even as the prospects of a deal on this front in the immediate future do appear too bright.
(The author is a freelance commodity analyst. blfeedback@thehindu.co.in )