A payments dispute with Iran which has hit oil trade may also reduce India's basmati rice exports by around 10 percent in the current fiscal year from a year ago to 1.8 million tonnes, an exporters' body said. In December, India's central bank said payments for Iranian crude could no longer be settled using a long-standing clearing mechanism in a blow to the Islamic Republic's $12 billion a year oil business as global pressure on Tehran grows over its nuclear programme.
India has now resolved the dispute, an oil ministry source said last week, with New Delhi certifying deals to try to ensure funds do not go to Iran's nuclear programme. "Direct payment to India from Iran (for rice) is becoming a major problem due to global sanction there," said Vijay Setia, president of the All India Rice Exporters' Association.
Iran is one of the main buyer of the aromatic rice for India, the world's top producer. Iran and Saudi Arabia buy around $1.5 billion worth of basmati rice a year from India, roughly half each, traders say. India's total annual basmati exports are about $2-3 billion and basmati rice makes up around 5 percent of India's total rice production.
Although United Nations sanctions do not forbid buying Iranian oil, the United States had pressed hard for governments and companies to stop dealing with Tehran. Many oil majors and banks have abondoned their dealings with Iran since last year.
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