Basmati exports to Iran stop, become costlier for West Asia; industry fears heavy demurrage

With the continuing Israel-Iran conflict impacting business and trade, industry sources have pointed out that exports of basmati rice to Iran have stopped and shipments to the Middle East have become expensive for basmati rice exporters.The Commerce Ministry held a meeting today (June 20) with shipping lines and container associations to assess the impact of the continuing Iran-Israel conflict and other geopolitical developments on India’s trade.

As per government sources, stakeholders from the shipping and air cargo sectors had said the situation in the Strait of Hormuz

is currently stable, and the ship reporting system is in place to monitor any incidents. While freight and insurance rates are being closely monitored, the government is exploring all possible alternatives for an appropriate response, even as the commerce secretary emphasised the need to assess the evolving situation’s impact on India’s trade.
Industry sources pointed out that the continuation of the conflict beyond Monday (June 23) may impact cargo movement to Russia, CIS countries and Afghanistan from Iran’s Bandar Abbas port.
As per the Federation of Indian Export Organisations (FIEO), Iran’s Bandar Abbas port is operational for cargo movement to these countries, including Uzbekistan, which is only accessible via Bandar Abbas after closure of the Karachi port. Industry stressed on the need to improve Chabahar’s connectivity to Uzbekistan by engaging local players to stop losses in case Bandar Abbas’ operations are affected.Referring to increased freight charges and transit times for Red Sea ports like Aqaba, Beirut, and Lattakia, industry sources said for exporters using the Red Sea route, shipments are being routed to ports like Jeddah and Alexandria.

Reportedly, exports to Saudi Arabia are seeing a rise due to the Neom city construction project. Amidst fears of exports to Gulf and Mediterranean countries suffering due to blockage of ship movement in the Persian Gulf, the industry has called for a focus on the India-managed Chabahar Port which has connectivity via Dubai and a direct linkage from the Kandla Port.

With exporters delaying shipments and buyers having put orders on hold, there are concerns of goods getting stuck at ports, leading to heavy demurrage. For instance, ocean freight from Indian ports to EU and Mediterranean ports has surged by $1,000 per TEU.

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