India’s Rice and Tea Exports Disrupted by Iran-Israel Conflict

The perennial Iran- Israel dispute has almost hit us on the export of rice and tea, mainly the shipments to Iran, which is our biggest importer of Indian basmati rice and also, a very big consumer of Indian tea. It has frozen shipments and payments that have resulted to a decline in global prices and piled up stocks. As they await a solution, exporters are experiencing an amassing of problems, such as the increase in freight and insurance rates.

Context

• The Iran-Israel standoff has interfered with the major export destinations of the two most important products of India, basmati rice and tea, with Iran being one of the biggest markets of the same. 

• The halting of freight and payments has brought into doubt the part's effect on trade and pricing in the long term.

Key Points

Implication On Rice Exports:

• Key Export Market: Iran is the biggest customer of Indian basmati rice that exports an average of six million tonnes per year with 1.2 million tonnes of the same exported rice being consumed in the country.

• Delays in Shipment and Payment: With the conflict, all shipment and payment has been delayed due to the conflict and the exporters are engaged with the officials so as to solve the issue of this delay.

• Price decline: The prices of basmati rice in international markets have declined by 100 dollars per tonne, and the exporters are sitting on piled up stocks.

Tea Exports:

• Iran: Tea exports of India to Iran are between 20,000-25,000 tonnes annually comprising mainly of orthodox tea.

• Auction Withdrawals: owing to the war, tea auctions had an outflow and a price decline. Orders are on a stand and exporters are afraid of how worst things will get.

• Indecision on Payment: Payment shall take place only after shipment of the Teas and the priorities in Iran are changing towards essential goods and the export of Tea is under obscurity.

Futures Concerns:

• Regional Impact: It is also feared that trade to other nearby states like Azerbaijan and Kazakhstan might also be hit in case the row continues.

• Rise in Cost: Air and sea freight have already started rising and the exporters are bracing up to expect further rise in fuel cost and risk insurance cost.

Government Intervention:

• Stakeholder Meetings: The Ministry of Commerce and Industry will discuss with the interested parties in the trade, shipping, and export business the effect of the conflict and possible government assistance.

• Exporter Feedback: The Ministry has collected feedback on how the exporters are coping with the challenge and how they are being affected by the situation.

• The issues behind the conflict: The exporters have to grapple with rising costs of operations such as freight expenses and they worry about the overall economic implication of the conflict on trade with Iran and other nations in the region.

• Role of Government: The Ministry of Commerce is working on measures that can enable the exporters and reduce the financial loss due to disruption of trade.

Conclusion

India has suffered because of the Iran-Israel conflict as its rice and tea products have been interfered with and thus the exporters are taking a lot of hit as their products are delayed, the price has fluctuated and increasing the operational cost. Although the government of Indians is busy discussing ways of resolving the current situation with the stakeholders, it is still not clear which way trade with Iran and other regions around will go. The scenario highlights the sensitivity of international trade to geo-politics especially to those countries whose economies depend on important markets such as India.