India’s largest selling rice brand is now a zero-tax product

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    India Gate rice is exempt from paying the 5% GST rate on branded rice because KRBL Ltd did not get the brand name registered under Trade Marks Act 1999

     
    India Gate rivals Daawat and Kohinoor have been critical of the country’s largest rice brand not paying the 5% GST rate applicable on branded rice.
    India Gate rivals Daawat and Kohinoor have been critical of the country’s largest rice brand not paying the 5% GST rate applicable on branded rice.

    New Delhi: India Gate, the country’s largest selling rice brand, is exempt from paying goods and services tax (GST) because the company did not get the brand name registered under the Trade Marks Act 1999.

    “This is to further clarify, declare and certify that ‘India Gate, Indian Farm, Lotus and Unity’ brands are owned by KRBL Ltd but since they are not registered in Class 30 under ‘Trade Marks Act, 1999’ hence ‘NIL’ GST rate is applicable on it,” KRBL Ltd, which sells India Gate packaged rice, said in an internal communication dated 3 July. Branded rice was either exempt from tax or carried a 5% value-added tax, depending on the state where it was sold, before GST was implemented. Following the implementation of the indirect tax on 1 July, such products have become dearer in many states. KRBL’s largest competitors, including the Indian unit of McCormick and Co., which sells Kohinoor packaged rice in India, have to pay GST, making their products more expensive. KRBL’s rivals have been critical of the country’s largest rice brand not paying the 5% GST that is applicable on branded staples. They have also raised doubts about whether the definition of “registered brand name” has been interpreted correctly by the company to claim the GST exempt status. A KRBL spokesman said the company is following government norms. A spokesperson for McCormick in India declined comment. LT Foods Ltd, seller of the Daawat brand of rice, also declined comment. The finance ministry on 5 July clarified that “registered brand name” is a brand name or a trade name “which is registered under the Trade Marks Act, 1999” and should be on “the Register of Trade Marks and remain in force”. That KRBL does not have the brand registered wasn’t for lack of trying. The company has applied for trademark registration of the India Gate brand of rice and other staples multiple times since 1999 before the Controller General of Patents Design and Trade Marks, according to the Intellectual Property India website. Its applications were either objected to, opposed or refused. Vikram Roller Flour Mills Ltd was the last to hold the trade mark registration of India Gate brand. The registration was valid till November 2013, according to the website. It couldn’t be immediately ascertained whether it still owns the brand. Calls to the company’s landline weren’t answered. Vikram Roller still sells wheat flour under the India Gate brand. According to a 2 July statement by the finance ministry, GST on staples such as rice, wheat and cereals is zero. Abhishek Rastogi, a partner at law firm Khaitan & Co., said it is possible for a company to sell the product under a brand name and still claim zero GST. “If the name is not registered under the Trade Marks Act 1999 and not listed with the Trade Marks Registry, the brand will not attract 5% GST,” Rastogi said. That seems to be KRBL’s understanding as well. Interestingly, on 30 June, KRBL filed an application with the registrar of Trade Marks seeking cancellation of the name KRBL Ltd from the Trade Marks Registry. In its application, it said that the company was “not using the trademark KRBL Limited in relation to rice”. The company registered the trademark of KRBL Ltd on 24 July 2000 and this is valid till 24 July 2020. Shares of KRBL have gained 3.81% on the BSE since the GST was implemented on 1 July. The exchange’s benchmark Sensex rose 1.45% in the same period. KRBL claims that its flagship India Gate brand dominates the branded rice market in India with a 29.5% share in terms of value, according to a company presentation to investors in December 2016. The company reported net profit of Rs399 crore on revenue of Rs3,159 crore in the year ended 31 March. About 48% of the company’s revenue comes from India and the rest from exports. West Asian countries account for about 44% of KRBL’s revenue.
  • Price cap on Indian rice supports Pakistan’s rice exports to Iran

  • At times when Pakistani exporters of textile made-ups are unhappy over the crisis being faced by them in international markets, rice exporters seem happy to avail the opportunity of improving exports to Iran, following restrictions by Iran on rice imports from India. As both India and Pakistan produce the same high quality of rice known as Basmati, the two countries usually compete for major rice consuming countries, especially Iran which is considered a major destination for the long-grained aromatic rice. According to sources, Indian exporters of Basmati rice are facing serious problems in Iran after Tehran put upper limits for import and consumer prices of the cereal. While India’s recent exports of the rice to the West Asian country cost the importer around $950 per tonne (landed price), the ceiling price imposed is $850 a tonne and the maximum consumer price set is $ 1.15 a kg. With the ceiling prices, it would not be economically viable for India to export rice to Iran. Iran consumes more than 3 million tonnes of rice annually and a third of this demand is met by imports. Indian exporters have feared that the crisis in Iranian market would indirectly benefit Pakistan because of its proximity to Iran, as transportation cost was higher for India’s exporters. Not only the ceiling issue but also the uncertainty overuse of currency for trade between Delhi and Tehran has impacted India’s basmati rice exports to Iran following hesitation over the use of the dollar after fresh sanctions levied by the United States on the republic. Indian Basmati exports to Iran had witnessed sharp jump as Delhi launched a rupee settlement mechanism from April 2012 with Iran to avoid sanctions from the US and EU. This situation, as exporters in Pakistan believe, has opened room for exporters here to meet the demand of the neighbouring country. The export of rice mainly Basmati to Iran is being witnessed during the past few months creating over 50 per cent jump in the domestic price of the commodity. “We are largely happy to see the boost in export after a long time crisis faced by the sector,” said an exporter from Punjab. “Not only the crisis in Iranian market but the hike in the domestic price of rice in India following low production has also caused a reduction in export to Middles Eastern countries creating an increased demand for Pakistani rice in the traditional markets,”  he added. According to the data of Pakistan Bureau of Statistics (PBS), the exports of basmati rice from the country during the month of March 2017, increased by 154.28 per cent compared to the exports of the corresponding month of last year. During the month of March, about 45,745 metric tonnes of basmati rice worth US$ 43.976 million were exported as compared to the exports of 17,412 metric tonnes valuing of US$ 17.294 million of the same month last year. It may be recalled that food group exports from the country during the month of March decreased by 10.20 per cent and it was stood at US$ 346.12 million as against the exports of US$385.313 million of the same month last year. In last 3 quarters (July-March) of current financial year food group exports decreased by 11.58 per cent and recorded at US$ 2.885 billion as against the exports of US$ 3.037 billion of the corresponding period last year.
  • Basmati export benefits from ban on DA, exporters seek similar move for non-basmati

  • CHANDIGARH: Basmati, premium rice, has brought back flavour in the export for the domestic companies who are hailing timely payments from overseas buyers after the Indian government banned documents against acceptance (DA) for the commodity in the current marketing season. The exporters are mulling to seek similar DA restriction for export of non-basmati from India in the ensuing marketing season. The practise of DA had tilted the basmati trade in favour of overseas buyers due to rise in defaults, delayed payments and price manipulations that adversely affected domestic companies. The DA allowed export of consignment without settlement of payments. Even though DA has been banned in the last year for export of basmati but the practise is still prevalent in case of export of non basmati from India. "The curb on DA in export of basmati has decreased defaults in the trade and also given control over prices to the domestic exporters," executive director, All India Rice Exporters Association (AIREA) Rajen Sudershan told ET. Sudershan said that the rice exporters lobby is contemplating to seek ban on DA in case of non-basmati from the Indian government. "The move will boost export and also benefit different stakeholders in the rice trade," he said. The rice exporters maintain that the ban on DA had brought benefits to domestic companies as well as farmers who received timely and higher remuneration this time compared to the previous marketing season. "The policy amendment on DA by government has given confidence to exporters who were exploited by buyers once consignments have been delivered," Vijay Sethia past president of AIREA said. Sethia said that the practise of DA allowed buyers to manipulate all companies who were forced to compromise on margins. This year the ban on DA has promoted transaction through Cash against documents and Letter of Credit. "It has lead to better rice realization to exporters and higher remunerations to farmers," Sethia said. The export of basmati this season stood around 3.99 million tonnes till March 2017 compared to 4.4-million tonnes in 2015-16. The Indian basmati export has been affected due to less basmati trade to Iran after the gulf nation introduced price regulation of $850 per tonne on basmati import.
  • Wheat, rice basmati soften on sluggish demand

  • Basmati rice (Lal Quila) Rs 10,700, Shri Lal Mahal Rs 11,300, Super Basmati Rice Rs 9,800, Basmati common new Rs 7,100-7,200, Rice Pusa (1121) Rs 5,800-6,400, Permal raw Rs 2,250-2,275, Permal wand Rs 2,300-2,350, Sela Rs 2,700-2,800 and Rice IR-8 Rs 1,875-2,000, Bajra Rs 1,360-1,370, Jowar yellow Rs 1,600-1,650, white Rs 3,300-3,500, Maize Rs 1,425-1,435, Barley Rs 1,575-1,595

    New Delhi, May 25 Prices of wheat and rice basmati fell by up to Rs 100 per quintal at the wholesale grains market today owing to muted demand against sufficient stocks position. Traders said besides low demand demand from flour mills, ample stocks position on increased arrivals from producing belts, mainly weighed on wheat prices. Tepid demand from retailers kept pressure on rice basmati prices, they said. In the national capital, wheat dara (for mills) declined by Rs 5 to Rs 1,730-1,735 per quintal. Atta chakki delivery followed suit and traded lower by a similar margin to Rs 1,735-1,740 per 90 kg. Rice basmati Pusa-1121 variety also fell by Rs 100 to Rs 5,800-6,400 per quintal. Following are today's quotations (in Rs per quintal): Wheat MP (desi) Rs 2,100-2,345, Wheat dara (for mills) Rs 1,730-1,735, Chakki atta (delivery) Rs 1,735-1,740, Atta Rajdhani (10 kg) Rs 240, Shakti Bhog (10 kg) Rs 240, Roller flour mill Rs 950-960 (50 kg), Maida Rs 960-970 (50 kg) and Sooji Rs 1,030-1,040 (50 kg). Basmati rice (Lal Quila) Rs 10,700, Shri Lal Mahal Rs 11,300, Super Basmati Rice Rs 9,800, Basmati common new Rs 7,100-7,200, Rice Pusa (1121) Rs 5,800-6,400, Permal raw Rs 2,250-2,275, Permal wand Rs 2,300-2,350, Sela Rs 2,700-2,800 and Rice IR-8 Rs 1,875-2,000, Bajra Rs 1,360-1,370, Jowar yellow Rs 1,600-1,650, white Rs 3,300-3,500, Maize Rs 1,425-1,435, Barley Rs 1,575-1,595.
  • Exports of Basmati Brown (cargo) Rice to E.U

    Asia Rice-Thai, Vietnam prices hit multi-month high; India stays sluggish

  • * Thai upward price trend continues on ongoing demand, export prospects * Vietnamese traders store rice, anticipate more gains * India's high prices slow down trade, turn away main buyers By Patpicha Tanakasempipat and My Pham BANGKOK/HANOI, May 18 Rice prices hit multi-month peak in Thailand and Vietnam this week on export prospects, while high rates in India kept buyers at bay, traders said on Thursday. Thai benchmark 5-percent broken rice RI-THBKN5-P1 rose this week to $385-$411 a tonne, free-on-board (FOB) Bangkok, from $387-$392 last week. At a mean of $398 per tonne, Thai rice prices hit their highest in nine months, Reuters data showed.
     
    Traders said as Thai exporters are still buying stocks to fill shipments, heightened expectations of more demand from some of the world's top importers also helped prices to surge. Last week, Bangladesh's state grains buyer said they will import 600,000 tonnes of rice. It has already issued two tenders for a total of 100,000 tonnes of rice. "Exporters continue to sell, ships are still being loaded, and big buyers are now coming in," said a Bangkok-based trader. "If buyers keep purchasing, prices will keep increasing," said another trader from Bangkok. Vietnam's 5-percent broken rice RI-VNBKN5-P1 was quoted at $365-370 a tonne, FOB Saigon, up from $355-$360 last week, following the trend in Thailand. Averaging $367.50 per tonne, Vietnamese rice prices are at an 11-month high, according to Reuters data. Anticipating more demand from leading importing countries, Vietnam traders are storing rice in order to sell later as prices advance. "People expect demand to jump further so they are not rushing to sell now," said a Ho Chi Minh-based trader. Vietnam shipped an estimated 1.84 million tonnes of the grain between January and April, down 8.8 percent from the same period last year. Thailand and Vietnam are the world's second- and third-biggest rice exporters. In India, the world's biggest rice exporter, 5-percent broken parboiled rice prices RI-INBKN5-P1 eased by $3 per tonne to $391-$396 a tonne this week on sluggish export demand. In the past two months, there has been a sharp rise in Indian rates on government buying and as appreciation in the rupee caused a rally in local paddy prices. The rupee has risen more than 5 percent so far this year and is trading near its highest level in 21 months. A strong rupee trims returns of exporters, who cannot afford to cut prices. "African buyers are shifting to Vietnam. Indian rice is not competitive at the current price level," said an exporter based at Kakinada in the southern state of Andhra Pradesh. India mainly exports non-basmati rice to African countries and premier basmati rice to the Middle East. The Indian government buys rice from local farmers at a fixed price to supply subsidised food and meet any emergency needs such as a sudden spike in prices. The government has bought 36 million tonnes rice from farmers so far in 2016/17, up 24 percent from a year ago. (Reporting by Patpicha Tanakasempipat in BANGKOK and My Pham in HANOI; Additional reporting by Rajendra Jadhav in MUMBAI; Editing by Sherry Jacob-Phillips)
  • Monsoon in India: Rains set to hit Kerala coast on May 30, says IMD

  • Thanks to normal rainfall last year, the country’s foodgrain production in 2016-17 crop year (July-June) is estimated to reach an all-time record of 273.38 million tonne, which is 8.7% more than the previous year.

    By: | New Delhi | Published: May 17, 2017 4:35 AM
     
    Monsoon usually arrives over Kerala in the first week of June, then covers rest of the country during next one month or so.
     
    India Meteorological Department (IMD) on Tuesday stated that the southwest monsoon (June-September) is likely to hit Kerala coast on May 30 with a model error of ± 4 days. Monsoon usually arrives over Kerala in the first week of June, then covers rest of the country during next one month or so. “The statistical model forecast suggests that the monsoon onset over Kerala in this year is likely to be close to the normal date,” IMD said in a statement. The met department also stated ‘conditions are now becoming favourable for the further advance of southwest monsoon into parts of Bay of Bengal and remaining parts of Andaman Sea, Andaman & Nicobar Islands during the next 48 hours. IMD director general K J Ramesh last week had told FE that the met department stands by first monsoon forecast released last month where it had predicted that ‘normal’ rainfall this year at 96% of the benchmark Long Period Average (LPA), with a model error of ± 5%. IMD will release the second forecast for the season in the first week of June. Ramesh had stated that ‘there is a relatively moderate possibility of El Nino conditions, which adversely impacts progress of monsoon rains, developing during second half of the monsoon months (June-September) and neutral conditions of Indian Ocean Dipole would likely to result in ‘good distribution of rainfall across the country’. Subsequently the Australian Bureau of Meteorology, stating that prospects of a strong El Nino developing in the Equatorial Pacific have receded. Meanwhile, in its advisory for the farmers,the met department has urged undertaking of nursery preparation for viruppu rice in Kerala utilising pre-monsoon showers while in case of rain deficient areas, it urged farmers to commence planting of pepper and prepare the field for rice crop. For Karnataka farmers, IMD’s agro-advisory bulletin called for sowing of pulses like cowpea, green gram, black gram, horse gram, field bean, chilli etc. and green manure crops. For North-eastern states farmers, IMD advisory has urged farmers to continue nursery for raising main kharif rice. Last year, the IMD had made an initial forecast of ‘above normal’ rainfall of 106% of LPA, but the actual cumulative rainfall was 97 of the LPA, which falls in ‘normal’ category. Also Watch: Because of normal rainfall last year, the country’s foodgrains production in 2016-17 crop year (July-June) is estimated to reach an all-time record of 273.38 million tonne (MT), which is 8.7% more than the previous year. Due to two consecutive years of deficient monsoons (2014 & 2015), the foodgrains production went down to 252 MT in 2014-15 and 2015-16 crop years from 265 MT reported in 2013-14.
  • Returns on rice: The making of India’s biggest basmati exporter

  • Anil Mittal's family business KRBL is reaping the benefits of its decision to penetrate the domestic market with new brands and varieties of basmati, while maintaining a strong export business

    mg_96111_krbl_280x210.jpgAnil K Mittal, chairman and MD, KRBL, says business was ingrained in him at a young age
    Image: Amit Verma What’s in a name? A rose by any other name would smell as sweet, William Shakespeare had insisted. However, Anil K Mittal, chairman and managing director of India’s top rice exporter KRBL—makers of the popular India Gate basmati rice among other brands—politely disagrees, at least as far as his company’s name is concerned. “I wish we had retained the full name, Khushi Ram & Behari Lal, instead of the abbreviation, as it speaks volumes about our legacy,” says Mittal. “After all, there’s a lot in the name.” The legacy that Mittal refers to spans a century. The company, headquartered in Noida, has come a long way since it was founded in 1889 in Lyallpur (present day Faisalabad in Pakistan) by Behari Lal—Mittal’s great grandfather—and his brother Khushi Ram. Back then, it had interests primarily in cotton-spinning mills; it was also involved in banking and textiles. Rice mills, now its mainstay, comprised just a miniscule part of the overall business then. Today, KRBL is the world’s largest rice miller and exporter with over 30 percent share of the domestic and 25 percent share of the branded basmati rice export market. It runs two plants—one in Dhuri, Punjab, and the other in Gautam Buddha Nagar in Uttar Pradesh—with a combined milling capacity of 195 MT per hour, according to Karvy Stock Broking. Apart from the flagship India Gate basmati rice, KRBL’s other basmati brands include Doon Basmati, Nur Jahan and Bemisal. While the company has mainly positioned itself as a basmati provider, in the non-basmati category its brands include Aarati. In addition, the company also produces value-added products such as bran oil and has an installed renewable energy capacity—comprising bio-mass, wind and solar—of about 134 MW.
    mg_96113_krbl1_280x210.jpg
    For the financial year ended March 31, 2016, KRBL reported a total income of Rs 3,594 crore and a net profit of Rs 334 crore. Experts say the figures are not surprising given the company’s brand strength, quality distribution, lower cost of raw material and higher price realisation. KRBL’s market capitalisation too has grown at a compounded annual growth rate (CAGR) of 86 percent over the last five years to touch Rs 9,699 crore on March 31, 2017. In the last one year alone, its shares have surged by 88 percent on BSE to touch Rs 430 on April 24, 2017. “I believe the major inflection point for KRBL was after FY12. The management prepared a road map to increase the exposure to basmati rice and the domestic market,” says Deven R Choksey, managing director, KR Choksey Investment Managers. “The company developed a lot in terms of its distribution channel. This has helped them improve their penetration in the domestic market. Besides, they have increased their presence across different international markets, which has also reduced vulnerability in financial performance,” he adds. For instance, Iran’s ban on rice imports between October 2014 and December 2015 only had limited impact on the financial growth of KRBL as it was largely offset by strong growth in other West Asian countries. “Going ahead, the lifting of Iran’s ban on [rice] imports along with Indian youth showing a preference for basmati could aid topline growth for industry players,” says Choksey. Business was ingrained in me at a very young age and I started working when I was all of 12, giving a helping hand to my father who had suffered a heart attack then,” the 65-year-old Mittal tells Forbes India. After witnessing success in the cotton trade in Pakistan, Mittal’s family had migrated to India in 1947 during Partition. “It was a few years before my birth. My family came back from Pakistan in a chartered flight and landed at Safdarjung airport in Delhi. Life changed for everyone and business had to begin from scratch,” Mittal says, recalling the stories narrated to him by his father. While they had three other properties in India, the family chose to set up its headquarters at Naya Bazar, Delhi’s famous grocery market, and began as trade agents. Scaling up, “from small to big”, is an easier transition than “falling from top to bottom”, says Mittal, pointing out that the hardships, then, are far more. His family, he remembers, in the early 1950s had made a refugee claim worth Rs 3 crore to the government for lost property. Of that, assets worth Rs 1 crore were sanctioned and those rejected were claims for properties registered in the name of the company. “We were told we would get money only for properties registered in our name,” says Mittal. With the money they got—which was to the tune of Rs 3.5 lakh—KRBL started a business of running oil mills and rice mills. Mittal officially joined the business in 1968. “Ours was a large family. I had many uncles who were a part of the business. I realised that if I had to make my mark I would have to do something innovative, even if that meant taking the same business forward.” Mittal then briefly worked at his maternal uncle’s flour mill in Uttar Pradesh. “Those were the days when I was trying to do things on my own and it was an enriching experience that changed my life. Flour mills were like money-churning machines. I garnered enough experience to start off on my own.” In the mid-1970s, Mittal bagged a tender to supply barley to the army. “That was the turning point in my life,” he says with a beaming smile, and “there wasn’t any looking back since”. From barley, the transition to a full-fledged rice business, he says, was not too cumbersome. “KRBL was already in the rice business, but that was with the whole family. I decided to redefine the business and focus primarily on rice, changing the company’s name to Anil Trading Company. But soon after its success, I changed the name back to Khushi Ram & Behari Lal.” It became KRBL in the late 1990s. The early years purely went into trading in rice. “We became suppliers to leading domestic exporters. And as fortune favours the brave, when India opened rice exports in 1978-79, life changed completely for us,” says Mittal, who kick-started the process to export the grain himself in the mid-1980s. “By then, we had already made a name for ourselves in the industry and also knew the key people. From supplying rice to big exporters, we decided to become exporters ourselves,” says Mittal. “The remarkable growth that the company has witnessed has to do with the management’s involvement in every aspect of the business right from seed development to modern farming,” says Jagannadham Thunuguntla, head of fundamental research, Karvy Stock Broking.
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    On more than one occasion, KRBL has shown its prowess in identifying the right variety of rice that the market would accept. In the 1990s, when KRBL recognised Pusa No 1 as a variety of basmati, it was rejected by the entire industry. Today, it is one of the most popular basmati rice varieties in the world. Again, in the early 2000s, when KRBL introduced Pusa 1121 (the grains of which are slightly longer than Pusa basmati rice) to the market, it once again took the industry by surprise. This was a special basmati line developed by the Pusa Institute, Delhi, but the industry could not foresee its potential. “I decided to cultivate and multiply this variety [Pusa 1121] in our contract farming programme on a commercial basis,” says Mittal. KRBL’s own research and development team and scientists were involved in this project, and they were the first ones to bring Pusa 1121 into the market—export as well as domestic. “When Pusa 1121 was launched, it just swept the markets across the world. The entire industry was astounded with the sensational success of this variety,” recalls Mittal. According to company data, of the 12 million tonnes of basmati paddy currently being produced in India annually, Pusa 1121 accounts for about 6 million tonnes. Another decision that Mittal claims to have worked in favour of the company is the takeover of Oswal Agro Furane, a sick unit in Punjab, from the High Court of Punjab & Haryana in 2003. Today, it is the biggest rice plant in the world with a capacity of 140 MT per hour and can process about 1 million tonnes of paddy per year which is about 7 percent of the paddy cultivated in Punjab. The success of any business, Mittal knew, was not in the vision alone. A lot depends on execution too. “When I started doing business, I used to look up to large business houses. While it’s not fair to take names, it was my dream to grow into those kind of mighty and huge establishments one day,” says Mittal. “But over the years, I have also seen many reputed enterprises coming down drastically. The descents have been as quick as the ascents.”
    I entered this industry as a young man... facing formidable competitors. The beginning was very modest and the journey intimidating.
    While KRBL is run by Mittal, his brothers, and daughter Priyanka, he says he is focusing on a lean organisation which would be nimble enough to adapt to quick changes. After all, the basic strength of any setup comes from its people. Key departments such as human resources and marketing work in tandem to “choose the right people for the right positions, so that the right decisions are taken at the right time. And it is important that all the people are capable of thinking and acting in their individual capacity,” says Mittal. For any business to grow, an employee should be allowed to function like an entrepreneur in his sphere of activity, he adds. The intrepid Mittal has travelled a fair distance in his entrepreneurial journey, but “there is still a big gap between my dream and my [position] today,” says Mittal. “I entered this industry as a young man, and I saw myself facing formidable competitors. The beginning was very modest and the journey intimidating. But you cannot give up.”

    (This story appears in the 26 May, 2017 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

  • Price cap on basmati rice imports by Iran worries Indian exporters

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     MUMBAI, FEBRUARY 19:The delay in restart of basmati rice imports by Iran and the new price cap of $850 a tonne could pose a major challenge for exporters in India. Basmati rice prices have rallied by 20-25 per cent since Iran announced to lift the five-month-old ban on imports from India last month. India exported 4.05 million tonne (mt) of basmati rice last fiscal. Of this, one mt was to Iran. This year, the industry expects overall exports to dip to 3.8 mt due to lower exports to Iran. Deepak Jotwani, Assistant Vice-President, ICRA, said, “Iran is a major export destination for Indian basmati rice and a decline in demand from Iran has played a major role in pulling down export realisation to $784 a tonne in the first eight months of this fiscal against $1,298 a tonne in FY14.” Iran’s strategyOver the years, Iran has imposed ban on basmati rice imports from time-to-time to reduce its inventory held by its traders and safeguard the interests of its local farmers. Iran last imposed a ban on basmati rice imports in July 2016. The Union government had sent a trade delegation to Iran in January to resolve the issue. Following this, it was expected that the import ban would be removed soon. While there has been no official notification from Iran, a group of large basmati rice importers in Iran have recently capped the price of basmati rice at $850 a tonne. In another adverse development for the industry, the US has recently imposed fresh trade sanctions on Iran, which restrains Iran from using dollar for trade. These two developments have created uncertainty around the resumption of basmati rice exports to Iran, said Jotwani. 75% goes to West Asia While basmati rice is consumed across the globe, West Asian countries accounted for 75 per cent of Indian basmati exports last fiscal. Within West Asia, Iran and Saudi Arabia are the two largest buyers, together accounting for 40-50 per cent of total basmati rice exports from India. In the past, Iran had been placed under economic sanctions by the US, Europe and the United Nations, following which India started transacting in rupee through UCO Bank to facilitate trade between India and Iran. This led to a surge in Indian basmati rice exports to Iran.
    (This article was published on February 19, 2017)
  • After Trump sanctions, currency crisis in Iran hits India’s basmati exports

  • Trade sources believe that Iran is looking to use the euro in place of the dollar

    Branded basmati sales to touch 2.9 mt
    Uncertainty over the use of currency for bilateral trade has put India's basmati rice exports to Iran in doldrums following hesitation over use of the dollar after fresh sanctions levied by the United States on the Islamic country.
    US President Donald Trump levied sanctions over 13 Iranian individuals and 12 entities for their support to the Iranian administration over the test of a non-nuclear ballistic missile last month. According to trade sources, Iranian authorities are hesitating over the use of the dollar for bilateral trade with friendly countries, including India. Since India has already cleared its oil dues in dollars, Iran lacks rupee denominated currencies in its foreign currency reserves which has created uncertainty over India's basmati rice exports to that country.
    Trade sources believe that Iran is looking to use the euro in place of the dollar. But, nothing has been finalised yet. Hence, till the final decision is taken, India's basmati rice exports to Iran would not resume. Shipment for old contracts, however, would continue.
    "India had a bilateral understanding with Iran for settlement of oil purchase in rupee. In fact, India cleared all dues emanating from crude oil purchase in dollar. Hence, the cash reserves in the rupee have exhausted. Interestingly, Iran is hesitating to use the dollar for bilateral trade in response to US sanctions on it. The Iranian administration has also not taken any final decision on the use of any alternative currency. Hence, uncertainty is plaguing India's basmati rice exports to Iran. Until the dark cloud over the use of currency recedes, India's basmati rice export to Iran is unlikely to resume," said Gurnam Arora, joint managing director, Kohinoor Foods Ltd, the producer and exporter of Kohinoor brand basmati rice.
    Meanwhile, a group of over six to eight importers in Iran has set $850 a tonne as the maximum import price of basmati rice from India which Indian exporters find unviable due to a sharp increase in the prices over the last four months. Indian exporters are seeking a minimum price of $925-950 a tonne for basmati rice exports to Iran.
    A senior Apeda (Agricultural and Processed Food Products Export Development Authority) official said that the government of Iran has not set any price for basmati rice import from India.
    "The currency issue can be dealt with bilaterally (between buyers and sellers) through use of alternative ones like euro, yen and rupee. So, our request to exporters is not to sell basmati rice at a loss. They should wait till a clear price signal is received from the market," a senior industry official said.
    Meanwhile, the price of the benchmark basmati rice in the wholesale market near New Delhi jumped by 50 per cent to trade at Rs 72 a kg now from Rs 48 a kg on October 1. Indian exporters, therefore, are seeking a similar increase in realisation from basmati exports to Iran. In the last two tenders, the average realisation works out to $650-700 a tonne.
    "Iran's move to put a cap is a result of cartel of importers there. However, Iran has also reduced duty on basmati rice to 26 per cent now from 40 per cent earlier to ensure that its countrymen get rice at a lower cost. Pakistan will get some advantage of this as their logistic cost is lower due to proximity with Iran," said Rajiv Tevtiya, managing director, RML AgTech, a city-based agri technology and advisory firm.
    Meanwhile, data compiled by Apeda showed India's basmati rice exports at 2.9 million tonnes between April and December of 2016, 0.1 million tonnes lower than the same period last year. Its export, however, is likely to get a boost and touch last financial year's level of 4 million tonnes by March 2017, said an Apeda official.
    Of around 1 million tonnes of annual imports, Iran has purchased nearly 0.5 million tonnes from India between April and December, 2016.
  • Rice basmati edges up on scattered buying

  • New Delhi, Feb 8 (PTI) In restricted activity, rice basmati traded higher by Rs 100 per quintal at the wholesale grains market today on scattered buying by stockists following uptick in demand.

    New Delhi, Feb 8 (PTI) In restricted activity, rice basmati traded higher by Rs 100 per quintal at the wholesale grains market today on scattered buying by stockists following uptick in demand. However, other grains after moving in a narrow range on little doing, settled at the previous levels. Traders said, some buying by stockists following pick-up in demand from retailers against restricted supplies from producing belts, mainly helped rice basmati prices to close in positive zone. In the national capital, rice basmati Pusa-1121 variety went up by Rs 100 to Rs 5,900-7,300 per quintal. Following are today’s quotations (in Rs per quintal): Wheat MP (desi) Rs 2,800-3,100, Wheat dara (for mills) Rs 2,020-2,030, Chakki atta (delivery) Rs 2,030-2,060, Atta Rajdhani (10 kg) Rs 285, Shakti Bhog (10 kg) Rs 285, Roller flour mill Rs 1,120-1,130 (50 kg), Maida Rs 1,190-1,200 (50 kg)and Sooji Rs 1,250-1,260 (50 kg). Basmati rice (Lal Quila) Rs 10,700, Shri Lal Mahal Rs 11,300, Super Basmati Rice Rs 9,700, Basmati common new Rs 7,100-7,300, Rice Pusa (1121) Rs 5,900-7,300, Permal raw Rs 2,200-2,250, Permal wand Rs 2,300-2,400, Sela Rs 3,000-3,100 and Rice IR-8 Rs 2,000-2,025, Bajra Rs 1,440-1,480, Jowar yellow Rs 1750-1800, white Rs 3,500-3,700, Maize Rs 1,590-1,600, Barley Rs 1,800-1,820.