End of monopoly: Pakistan’s rice trade with Iran takes a downturn
India’s basmati exports bounce back as they are paid up front with oil rupees.
India is Tehran’s biggest rice supplier but shipments were held up in early 2012 after Iranian buyers defaulted on payments. PHOTO: CREATIVE COMMON
DUBAI:
Iran’s oil export revenues are helping Indian rice exporters to claw back some of the lucrative business previously lost to cross-border truckers in Pakistan as a result of Western sanctions.
Direct Indian rice exports to Iran have bounced back, thanks to shippers being paid up front in rupees from a huge pool of oil money owed to Iran by Indian refiners.
India is Tehran’s biggest rice supplier but shipments were held up in early 2012 after Iranian buyers defaulted on payments. Many Indian suppliers then stopped sales on credit.
Tightened sanctions on shipping and bank transfers between Iran and India started a boom in Pakistani rice trucked across the remote border into Iran by groups based in Quetta, grain traders from Pakistan and India said at the world’s biggest food show last week.
From April 2011 to the end of March 2012, $821 million of Indian rice was shipped to the United Arab Emirates, more than anywhere else. But in just nine months from April to December last year, Iran imported over $725 million of Indian rice, up 20% on the previous 12 months, while Indian exports to the UAE slumped to $287 million, official figures show.
“The new payment mechanism has been helping Indian rice exporters. Competitors in Pakistan do not have any such facility,” M P Jindal, President of the All India Rice Millers Association, said.
Pakistan exported around 30,000 tons of rice, worth $21 million, directly to Iran in the second half of 2012, a sharp fall from the 12 months to the end of June 2012 when sales approached 140,000 tons, according to the Rice Exporters Association of Pakistan (REAP).
Pakistan’s rice sales to the UAE, the main shipping route into Iran, also dropped sharply to less than 52,000 tons in the second half of 2012, compared to nearly 228,000 tons in the previous 12 months, REAP data showed.
Iran relies on imports for about 45% of its annual rice consumption of 2.9 million tons, according to US Department of Agriculture data.
Iranian buyers prefer Indian basmati rice, but shipping and payment problems faced by Indian suppliers created an opportunity for Pakistani dealers based near the border with Iran to make big profits, rice exporters based in Karachi said.
Those willing to take the risk of trucking goods along hundreds of kilometres of highways of western Pakistan to the remote border area with Iran could charge premiums well above Indian rice prices.
“Last year India had a lot of currency issues and then Pakistan was selling at around $150 premium over India because India could not sell to Iran directly... It became a monopoly,” Mohammad Raza, a Karachi-based rice exporter, said.
“This year that is not happening... This year it has shrunk considerably, but it has not completely finished.”
The success of India’s oil pool for funding exports direct into Iranian ports over the last few months has hit Pakistan’s rice truckers’ profits hard, slashing premiums to well below $80 per ton in early 2013, he said.
“The trucks are not going to Iran. They used to go there but not anymore because the money is not coming from Iran to Pakistan so the trade has virtually stopped,” Tariq Ghori, Director of Karachi-based Matco Rice Processing, told Reuters at the Gulf Food trade fair in Dubai last week.
Matco, one of Pakistan’s biggest basmati rice exporters with sales of over 100,000 tons last year, and Raza’s company was not a part of the border food trade boom because the risks of shipping across Pakistan are high and the competition from Quetta-based groups fierce.
Many mainstream competitors shipping out of Karachi still rely on Dubai middlemen buy their product and sell it on to Iran, putting them at a disadvantage to Indian exporters now able to ship direct.
Published in The Express Tribune, March 9th, 2013.
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Iran’s oil export revenues are helping Indian rice exporters to claw back some of the lucrative business previously lost to cross-border truckers in Pakistan as a result of Western sanctions.
Direct Indian rice exports to Iran have bounced back, thanks to shippers being paid up front in rupees from a huge pool of oil money owed to Iran by Indian refiners.
India is Tehran’s biggest rice supplier but shipments were held up in early 2012 after Iranian buyers defaulted on payments. Many Indian suppliers then stopped sales on credit.
Tightened sanctions on shipping and bank transfers between Iran and India started a boom in Pakistani rice trucked across the remote border into Iran by groups based in Quetta, grain traders from Pakistan and India said at the world’s biggest food show last week.
From April 2011 to the end of March 2012, $821 million of Indian rice was shipped to the United Arab Emirates, more than anywhere else. But in just nine months from April to December last year, Iran imported over $725 million of Indian rice, up 20% on the previous 12 months, while Indian exports to the UAE slumped to $287 million, official figures show.
“The new payment mechanism has been helping Indian rice exporters. Competitors in Pakistan do not have any such facility,” M P Jindal, President of the All India Rice Millers Association, said.
Pakistan exported around 30,000 tons of rice, worth $21 million, directly to Iran in the second half of 2012, a sharp fall from the 12 months to the end of June 2012 when sales approached 140,000 tons, according to the Rice Exporters Association of Pakistan (REAP).
Pakistan’s rice sales to the UAE, the main shipping route into Iran, also dropped sharply to less than 52,000 tons in the second half of 2012, compared to nearly 228,000 tons in the previous 12 months, REAP data showed.
Iran relies on imports for about 45% of its annual rice consumption of 2.9 million tons, according to US Department of Agriculture data.
Iranian buyers prefer Indian basmati rice, but shipping and payment problems faced by Indian suppliers created an opportunity for Pakistani dealers based near the border with Iran to make big profits, rice exporters based in Karachi said.
Those willing to take the risk of trucking goods along hundreds of kilometres of highways of western Pakistan to the remote border area with Iran could charge premiums well above Indian rice prices.
“Last year India had a lot of currency issues and then Pakistan was selling at around $150 premium over India because India could not sell to Iran directly... It became a monopoly,” Mohammad Raza, a Karachi-based rice exporter, said.
“This year that is not happening... This year it has shrunk considerably, but it has not completely finished.”
The success of India’s oil pool for funding exports direct into Iranian ports over the last few months has hit Pakistan’s rice truckers’ profits hard, slashing premiums to well below $80 per ton in early 2013, he said.
“The trucks are not going to Iran. They used to go there but not anymore because the money is not coming from Iran to Pakistan so the trade has virtually stopped,” Tariq Ghori, Director of Karachi-based Matco Rice Processing, told Reuters at the Gulf Food trade fair in Dubai last week.
Matco, one of Pakistan’s biggest basmati rice exporters with sales of over 100,000 tons last year, and Raza’s company was not a part of the border food trade boom because the risks of shipping across Pakistan are high and the competition from Quetta-based groups fierce.
Many mainstream competitors shipping out of Karachi still rely on Dubai middlemen buy their product and sell it on to Iran, putting them at a disadvantage to Indian exporters now able to ship direct.
Published in The Express Tribune, March 9th, 2013.
Like Business on Facebook to stay informed and join in the conversation.