COMMODITY - BASMATI RICE (HS Code: 10063020)

MAJOR 5 COUNTRIES OF BASMATI RICE EXPORTS FOR INDIA

Country Particulars/Years 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Values in Rs.
3,65,908.10 6,71,706.04 7,25,886.50 5,49,385.15 4,50,835.91
Lacs
SAUDI % Growth 83.57 8.07 -24.32 -17.94
ARABIA
% of Total
18.85 22.93 26.31 24.18 20.87
Export by India
Values in Rs.
6,46,349.59 10,97,570.61 6,75,896.95 3,72,393.00 3,79,578.47
Lacs
IRAN % Growth 69.81 -38.42 -44.9 1.93
% of Total
33.3 37.47 24.5 16.39 17.57
Export by India
Values in Rs.
1,07,667.15 1,59,971.63 1,58,738.67 2,23,114.96 2,28,132.30
Lacs
IRAQ % Growth 48.58 -0.77 40.55 2.25
% of Total
5.55 5.46 5.75 9.82 10.56
Export by India
Values in Rs.
1,31,119.96 1,18,596.43 1,92,763.41 3,11,070.29 3,14,856.46
Lacs
UAE % Growth -9.55 62.54 61.37 1.22
% of Total
6.76 4.05 6.99 13.69 14.57
Export by India
Values in Rs.
1,05,967.74 1,51,305.57 1,53,322.63 1,37,670.34 1,00,308.52
Lacs
KUWAIT % Growth 42.78 1.33 -10.21 -27.14
% of Total
5.46 5.17 5.56 6.06 4.64
Export by India

Total export of
INDIA 19,40,938.89 29,29,182.16 27,58,670.70 22,71,859.65 21,60,453.67
commodity

From the data, we understand that the Middle East Countries tend to be the highest importers
for India in terms of basmati rice. The largest importer from India is Saudi Arabia since the
last 3 years but we have seen a fall in the growth of exports to this country considerably. The
second largest importer of basmati rice from India is Iran which was the largest importer
before Saudi Arabia in the fiscal year 2013-14. There is a significant fall of growth in the
year 2016-17 for exports to IRAQ & UAE for India. Also, Kuwait and Saudi Arabia seems to
be a major concern for India as there is significant drop in the growth rates YOY for exports
of basmati rice. Thus, the Middle East regions though being the largest importers of basmati
rice for our country have been in a troublesome situation due to the stringent barriers for trade
implied by their governments. For understanding and having a better outlook for this concern,
we would be analysing one of the largest importers of basmati rice for India which is Iran.

Basmati rice exports of India

1,200,000.00

1,000,000.00

800,000.00
Value (Rs. in Lacs)

600,000.00

400,000.00

200,000.00

0.00
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
SAUDI ARABIA 365,908.10 671,706.04 725,886.50 549,385.15 450,835.91
IRAN 646,349.59 1,097,570.61 675,896.95 372,393.00 379,578.47
UAE 107,667.15 159,971.63 158,738.67 223,114.96 228,132.30
IRAQ 131,119.96 118,596.43 192,763.41 311,070.29 314,856.46
KUWAIT 105,967.74 151,305.57 153,322.63 137,670.34 100,308.52

ABOUT THE COMMODITY

Basmati rice is a long grain with prominent characteristics of being soft and fluffy while
cooked with a delicious taste and distinct aroma and flavor which differentiate it from any
other grain. The long slender grains are grown from years in many fertile and specific
geographical areas such as the Himalayan foot hills in India. The word Basmati is derived
from the literatures of Hindi language and it means fragrant. The commodity was first
introduced by the Indian traders to the Middle East regions who have now become the largest
importers of the product.

Varieties of Basmati Rice

There are many varieties in basmati rice such as the basmati 217, basmati 385, basmati 1121
extra-long grain, super kernel basmati rice, basmati D-98, basmati P3 Punjab, basmati type
III Uttar Pradesh, basmati hbc19 safidon, kasturi, pusa, basmati 370, etc. Basmati mark is a
DNA based fingerprinting certification conducted by the authoritative agency of Basmati
Export Development Foundation.

MARKET SHARE & GROWTH OF BASMATI RICE

The country of India accounts for over 70% of the total production of basmati rice in the
world. The primary area where basmati rice is grown is in the states of UP, Punjab, Haryana,
Rajasthan, Himachal Pradesh, Delhi, Uttarakhand, Madhya Pradesh and Bihar. The major
producing state of basmati rice in India is Haryana which accounts for more than 60% of the
total production of the country.

Percentage of growth rate of exports of Basmati

Rice from India
100

80

60

40

20

-20

-40

-60
SAUDI ARABIA IRAN UAE IRAQ KUWAIT
2013-2014 83.57 69.81 48.58 -9.55 42.78
2014-2015 8.07 -38.42 -0.77 62.54 1.33
2015-2016 -24.32 -44.9 40.55 61.37 -10.21
2016-2017 -17.94 1.93 2.25 1.22 -27.14
 Percentage of exports in the Total Exports of India

2016-2017

2015-2016
KUWAIT
IRAQ
2014-2015 UAE
IRAN
SAUDI ARABIA
2013-2014

2012-2013

0 5 10 15 20 25 30 35 40

Hence, the India has maintained a good market share in the production and export of basmati
rice in the international markets. But, there is still a huge potential for this commodity as
most of the countries where India is currently doing their major exports belong to the Middle
East which have controlled economies with many stringent and strict regulations in terms of
International Trade with their country.
INDIA TRADE REGULATIONS FOR BASMATI RICE

The export policy of India towards basmati rice is a free trade policy as the commodity is
included in the agricultural produce and is mainly a part of AEZ of India. But, there a few
restrictions for the commodity and the same are mentioned below:

1. Exports for basmati rice is allowed subject to the registration of contracts with the
APEDA, New Delhi
2. Exports will be subject to Minimum Export Price (MEP) of US $700 per ton FOB as
per the notification by DGFT from time to time. Earlier it was US$ 900 or Rs.
41,400/- per MT FOB. MEP is expressed only in terms of US dollar. MEP shall be
exclusive of foreign commission for the exports of basmati rice
3. Grain of rice that should be exported will have to be more than 6.61 mm in length and
ratio of length to breadth of the grain should also be more than 3.5
4. Export of Basmati Rice is permitted through all the EDI ports of India. Earlier it was
allowed only through six ports.
5. Exports to EU is only permitted subject to pre-shipment quality inspection as
specified by the Government through a specific notification
6. For basmati rice, any exports to the Russian Federation are only permitted subject to
certain pre-shipment quality certification issued by the following agencies:
a) Insecticide Residue Testing Laboratory
b) Geo-Chem Laboratories Pvt. Ltd.
c) Reliable Analytical Laboratory
d) Arbro Pharmaceuticals Ltd.
e) Shri Ram Institute for Industrial Research, Delhi
f) Shri Ram Institute for Industrial Research, Branch Office Bangalore
g) Delhi Test House
h) Vimta Labs or any other agency as may be notified from time to time.
7. For any exports of empty printed gunny bags with markings that indicate the product
to be Indian Basmati Rice, in whatever manner, is not permitted when exported along
with the consignments of Basmati Rice, in which cases also, the same shall not exceed
2% of the total number of filled gunny bags of Basmati Rice being exported
8. For instances where un-bagged Indian Basmati Rice are being exported in bulk or in
bags of 50 KGS or above, the exports of empty printed gunny bags with any markings
 that indicates the product being Indian Basmati Rice, in whatever manner, will be
permitted to the extent of any actual requirements
9. Exporters of value added agro products like basmati rice will be eligible for sourcing
duty free fuel for generation of power, provided the cost component of power in the
ultimate product is 10% or more and the input-output norms are fixed by the advance
licensing committee of the DGFT
10. Financial assistance from state as well as central government for Training and
Extension, R&D, Quality up gradation, Infrastructure and marketing. Central
government Agencies like APEDA, NHB, Dept of Food Processing Industries,
Ministry of Agriculture provide assistance, a number of State Governments have also
extended similar facilities to such agro producers.

REGISTRATION OF CONTRACTS FOR EXPORT OF BASMATI RICE

For export of basmati rice, the following procedure designed by Agricultural and Processed
Food Products Export Development Authority should be followed for the Registration of the
Contracts and issuance of Registration Cum Allocation Certificate (RCAC):

Procedure
Application for Registration of Contracts for export of basmati rice should be filled by the
exporters in line at the APEDA website which is viz.www.apeda.gov.in. Once applications
are filled by the exporters, these will be received by the office of the Agricultural and
Processed Food Products Export Development Authority in New Delhi or one of the
authoritys regional offices.

Processing Charges
A processing fee of Rs.25 per MT would be charged for every contracted quantity and the
same shall be paid by the applicants. This amount can be paid by DD/PO and should be
drawn in the favour of APEDA. All the applications for registration of contracts should be
accompanied with the DD/PO of the required amount.

Registration
The applications received by the authority would then be verified and an RCAC would be
issued to each of the applicants.
Despatch Details
While registering a new contract on the website, all the applicants are required to provide
details of actual shipments made against the RCACs that have been issued earlier to them.
The original copies of RCACs in addition to the copies of shipping documents would be
required for submission after the completion of each dispatch for each RCAC.

Validity
The RCACs will be issued to all the exporters with its validity for shipment of 45 days from
the date of issue. Therefore, while applying for the RCAC the exporters are advised to ensure
that the quantity applied for registration is the one which is planned to be shipped in next 45
days. If the RCAC is issued, it will not be amended with respect to the particulars of the
buyer or the FOB prices.
ACCEPTED PRICES OF BASMATI RICE IN THE INTERNATIONAL MARKETS

The international market prices of basmati rice have seen a considerable decrease in the
trends of the last 5 years. We have seen the prices touching US $ 600 during 2012 which is
one of the highest trading prices that the commodity has witnessed. Also, the prices have
dropped to US $ 350 in 2016 which is very low when compared to the high demand of the
commodity in the year 2012. Hence, these prices have largely impacted the export earning
potential of our country as India is one of the largest basmati rice producing nations and high
demand of such a commodity directly impacts the exports of the country.

International Market Prices of Basmati Rice

 Trends in the International Market Prices of Basmati Rice

Month Price (US $ / metric ton) Change

July 2012 578.36 -

August 2012 582.87 0.78%
September 2012 590.5 1.31%
October 2012 584.74 -0.98%
November 2012 590.73 1.02%
December 2012 565.52 -4.27%
January 2013 573.39 1.39%
February 2013 574.07 0.12%
March 2013 564.52 -1.66%
April 2013 553.73 -1.91%
May 2013 552.09 -0.30%
June 2013 546.25 -1.06%
July 2013 538.26 -1.46%
August 2013 503.82 -6.40%
September 2013 470 -6.71%
October 2013 453.26 -3.56%
November 2013 448.81 -0.98%
December 2013 447.55 -0.28%
January 2014 441.04 -1.45%
February 2014 447 1.35%
March 2014 434.14 -2.88%
April 2014 409.94 -5.57%
May 2014 403.59 -1.55%
June 2014 414.67 2.75%
July 2014 428 3.21%
August 2014 440.38 2.89%
September 2014 436.5 -0.88%
October 2014 432.7 -0.87%
November 2014 419 -3.17%
December 2014 410.74 -1.97%
January 2015 409.68 -0.26%
February 2015 409.5 -0.04%
March 2015 400.73 -2.14%
April 2015 392.41 -2.08%
May 2015 382.43 -2.54%
June 2015 370.55 -3.11%
July 2015 387.74 4.64%
August 2015 375.57 -3.14%
September 2015 358.77 -4.47%
October 2015 360.45 0.47%
November 2015 358.38 -0.57%
December 2015 354.35 -1.12%
January 2016 359.48 1.45%
February 2016 373.19 3.81%
March 2016 370.48 -0.73%
April 2016 376.05 1.50%
May 2016 408.82 8.71%
June 2016 420.68 2.90%
July 2016 456.24 8.45%
August 2016 414.22 -9.21%
September 2016 384 -7.30%
October 2016 367.67 -4.25%
November 2016 360.82 -1.86%
December 2016 367.55 1.87%
January 2017 372.55 1.36%
February 2017 368.5 -1.09%
March 2017 367.78 -0.20%
April 2017 374.5 1.83%
May 2017 402.91 7.59%
June 2017 444.68 10.37%
 ANALYSIS OF THE COUNTRY SELECTED FOR EXPORTS OF BASMATI RICE
(IRAN)

INTRODUCTION

Iran is a young, educated population with enormous natural resources and has a
potential to become an economic power but faces a large amount of systematic
problems such as lack of transparency, crucial and over regulations, etc. The country
has a high inflation rate and major
corruption problems. The country is very
rich in oil resources and hence its export
earnings have seen a huge rise due to the
high oil prices. In 2010, estimated
government revenues totaled to US $ 51
billion and expenditures US $ 103 billion.
The government of Iran does not usually
accept any foreign aid except the
devastating incident of earthquakes in
Bam, Iran in 2003.The Iranian
government does not usually accept foreign aid. It has been reluctant to receive aid,
with the exception of humanitarian aid after the devastating earthquake in Bam, in
south-eastern Iran, in 2003.
KEY HIGHLIGHTS THE ECONOMY OF IRAN

Iran is the second largest economy of the Middle East and North Africa (MENA) regions
after the country of Saudi Arabia. The country is also the second largest in terms of
population in the region after Egypt with and estimated population of 79.5 million people in
the year 2016. Iran has been classified under the lower middle income economy and
economic relations with this region have been severely compromised since the 1979
Revolution. After the revolution, the limited US trade and investment sanctions who were the
largest importers for the country had hampered the economic conditions of the country. Some
of the key highlights of the country are mentioned below:
 Keys Statistics of Iran
Particulars 2012-13 2013-14 2014-15 2015-16
Population (million) 76.4 77.4 78.5 79.5
GDP per capita (USD) 7,552 5,629 5,451 4,948
GDP (USD bn) 577 436 428 393
Economic Growth (GDP, annual variation in %) -6.6 -1.9 4.3 -1.3
Consumption (annual variation in %) -1.7 -1 3.1 -3.5
Unemployment Rate - - - 11.8
Fiscal Balance (% of GDP) -0.6 -0.9 -1.2 -1.7
Public Debt (% of GDP) 11.8 11.2 12 15.9
Money (annual variation in %) 1.5 33.2 41.5 -
Inflation Rate (CPI, annual variation in %, eop) 41.2 19.7 16.2 8.3
Inflation Rate (CPI, annual variation in %) 30.5 34.7 15.6 11.9
Exchange Rate (vs USD) 12,279 24,797 28,050 30,260
Exchange Rate (vs USD, aop) 12,287 21,430 25,266 29,026
Current Account (% of GDP) 4 5.8 3.7 2.3
Current Account Balance (USD bn) 23.4 25.1 15.9 9
Trade Balance (USD billion) 28.6 29.3 18.1 12.2
Exports (USD billion) 97.3 92.9 89 64.6
Imports (USD billion) 68.7 63.6 70.9 52.4
Exports (annual variation in %) -33.3 -4.5 -4.2 -27.4
Imports (annual variation in %) -11.9 -7.5 11.5 -26.1

POLITICAL STABILITY OF IRAN

The Political Stability index of Iran does not favour it to be one of the strong political stable
countries of world but it is surely the most stable country after Saudi Arabia in its region. The
indicators range from -2.5 that is a weak political stability to +2.5 which would be a strong
political stable country. The data of its stability is mentioned below in the graph which is
from the data of the World Bank. Through the period of 1996 to 2015, the average value of
the index for Iran has been -1.01 basis points with the least value reaching to -1.62 and the
best value reaching to -0.37.
The index of political stability measures the perceptions of the likelihood that the government
of Iran can be destabilized or overthrown by unconstitutional or violent means, including
politically motivated violence and terrorism.

IRANS ABILITY TO SERVE AS A MARKET HUB

The country has taken initiatives to attract foreign investors by giving them many schemes of
building factories in Iran and export 30% of the products produced so as to receive a tax
reduction of 50% in addition to the other incentives the companies receive from the
government. Free-trade (FTZ) and special economic zones (SEZ) have been established to
provide additional investment incentives such as:

Tax-exemption for 20 years

No entry visa requirement
Possibility of 100% foreign ownership
Flexible employment regulations
Flexible monetary & banking services
Extended legal guarantees & protection
 Licenses - Imports - Permits
Staff - Distributors - Clients
Training - Operational Infrastructure

TAX STRUCTURE AND INCENTIVES OF IRAN

The financial year begins on March 21 and ends on March 20 of the next year according to
the Iranian calendar. The Ministry of Finance and Economic Affairs is the government
agency authorized to levy and collect taxes in Iran. One of the important policies of the
country is the Foreign Investment Promotion & Protection Act (FIPPA) which is the
framework for tax and incentives structure for Iran. Some of the key highlights of the policy
are the following mentioned below:

a) There are no restrictions the percentage of foreign holdings according to the act
b) It allows the creation of Iranian registered company with 100% foreign holding
c) Foreign investors enjoy the same benefits as the domestic producers and there is no
differentiation of schemes among them
d) Allowing investment in all the sectors of the economy which attracts a lot of private
investments
e) Approvals of foreign investment applications are done quickly and efficiently
f) Expropriation and nationalisation of the foreign companies
g) Unlimited transfer of capital and dividend by the companies

REFERENCES

http://www.heritage.org/index/country/iran
http://www.mokran.ir/userfiles/mokran/Book/2439_orig.pdf
http://www.theglobaleconomy.com/Iran/wb_political_stability/
http://en.cmess.ir/default.aspx?tabid=73&ArticleId=39
https://chronicle.fanack.com/iran/economy/
http://www.worldbank.org/en/country/iran