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Informist, Wednesday, Jun. 18, 2025

 

By J. Navya Sruthi

 

MUMBAI – Prices of basmati rice, which fell more than 10% in a month, are expected to fall further by about 20% in the near future on account of the Israel-Iran conflict, market participants said. Demand for basmati rice from Iran, the third-largest importer of the grain from India, may decline sizeably, they said.  

 

On Friday, Israel struck several Iranian military and scientific targets, including nuclear facilities, as part of Operation Rising Lion to stop the country from developing nuclear weapons. Iranian media reported multiple explosions in the country, including at its biggest nuclear enrichment facility in Natanz. Israel has since declared an emergency in anticipation of retaliation by Iran.

 

Following the conflict, there were concerns about the closure of the Strait of Hormuz, which connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. This would require the re-routing of the shipments around the Cape of Good Hope, increasing transit costs.

 

Amid these tensions, prices of basmati rice in domestic markets fell around INR 300 per 100 kg Tuesday. Prices of basmati sella rice variety in Navi Mumbai's Vashi market were down at INR 6,000-INR 6,100 per 100 kg from INR 6,400-INR 6,500 per 100 kg. Prices of the 1121 basmati rice variety were down at INR 7,800 per 100 kg from INR 8,000 per 100 kg the previous day. Similarly, prices of the 1509 basmati variety fell INR 300 to INR 6,800-INR 6,900 per 100 kg.

 

Globally, India's basmati rice was priced at $900-$950 per tonne, down from $1,050-$1,100 per tonne in May, according to Rajesh Paharia, an agri-commodities trader and exporter. Prices are expected to fall further by 20% or more in the near-term due to the ongoing conflict between Iran and Israel, he said.

 

India exported over 6 million tonnes of basmati rice in 2024-25 (Apr-Mar), of which 14% were exported to Iran. While exports to the third-largest buyer of Indian basmati rice in FY25 were 855,133 tonnes, as per government data, shipments to Dubai and Iraq were also shipped to Iran, Paharia said. Total exports, including those to Dubai and Iraq, in FY25 were at 2 million tonnes, he added.

 

The prospect of a fall in basmati rice prices has affected the share prices of major rice exporting companies. On Tuesday, shares of KRBL Ltd., a leading basmati rice exporter, closed nearly 1% lower at INR 356.65 on the National Stock Exchange. A week ago, its shares were priced at INR 380. Similarly, shares of LT Food Ltd. closed at INR 441.95, down over 2%, on Tuesday. At 1429 IST, shares of KRBL traded 1.8% lower at INR 350.25 and those of LT Food traded 0.6% lower at INR 439.40 on the NSE.

 

According to Ajay Kedia, director, Kedia Advisory, there could be a potential drop of 25-30%, or 200,000-300,000 tonnes in Iran's basmati rice imports from India over the next quarter. While exporters are exploring alternative markets to absorb this expected surplus, the redirecting of such volumes may take time and effort, he added.

 

There are additional challenges as well. The ongoing clashes between Iran and Israel are likely to spur other costs such as freight, insurance, and surcharges, Paharia said. There is already a slowdown in new orders for the aromatic rice due to rising freight and insurance costs, which are weighing on exporters' margins and competitiveness, Kedia said. "(Basmati rice) price dip will be further compounded if exporters are unable to divert surplus stock, originally intended for Iran, to other markets quickly, increasing availability in domestic mandis," he added.

 

According to Kedia, the Containerized Freight Index, a tool that tracks the cost of shipping containers on major trade lanes, has jumped over 40% in recent weeks, while insurance premiums for vessels passing through the Persian Gulf have increased by approximately 20%. Amid ongoing security threats and possible re-routing of vessels away from the Strait of Hormuz, exporters may be forced to use longer and costlier shipping routes, such as the Cape of Good Hope, Kedia said. These alternative paths increase transit times and fuel consumption, with a 10-15% increase in freight costs over the next two months, he said. This will further reduce the profitability of Indian exporters and impact their ability to offer competitive pricing, Kedia said.

 

PAYMENT ISSUES

While there are already enough reasons for Indian basmati rice exports to Iran declining in the near term, payment issues with the country are adding fuel to the fire. According to reports and experts, payment delays remain a major hurdle for Indian basmati exports, with private buyers in Iran taking 6–8 months and government-linked entities requiring up to 180 days to settle dues.

 

Kedia said the outstanding payments by Iran for its basmati rice imports from India are estimated at INR 10 billion-INR 12 billion. The primary reason for payment issues is the US-imposed sanctions in 2018 targeting Iran's financial sector, which restrict dollar and euro transactions. Media reports said exporters urged the Indian government to explore secure trade mechanisms through rupee-rial trade or banking guarantees to safeguard their interests.

 

According to data from the commerce ministry, India exported 1.5 million tonnes of basmati rice to Iran in FY19, which accounted for nearly 34% of the country's total exports. In FY23, exports to Iran were 998,879 tonnes, nearly 33% lower than that in FY19.

 

The table below shows India's total basmati rice exports, along with Iran's share in total exports.

 

Year	Exports to Iran (tonnes)	Total exports (tonnes)	Iran's share in total exports (%)
2024-25	855,132.9	6,065,483.4	14%
2023-24	670,781.8	5,242,047.3	13%
2022-23	998,879.0	4,561,092.0	22%
2021-22	998,045.5	3,943,584.3	25%
2020-21	747,458.0	4,630,168.7	16%
2019-20	1,319,154.9	4,454,745.2	30%
2018-19	1,483,698.2	4,414,591.2	34%

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

US$1 = INR 86.49

 

Edited by Tanima Banerjee

 

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