The impact of the ongoing geopolitical tensions involving the United States, Israel and Iran is beginning to extend beyond oil markets and shipping routes. India’s basmati rice trade, one of the country’s most important agricultural export sectors, has also started feeling the effects of the disruption in West Asia.
Over the past 72 hours, prices of basmati rice in India have declined by roughly 7-10 per cent, according to reports cited by PTI. The fall has come as shipments to the Middle East, a key destination for Indian basmati exports, have slowed sharply amid logistical disruptions in the region.
Industry stakeholders say the sudden slowdown in exports has led to excess supply in the domestic market, raising concerns that prices could fall further if shipping constraints persist.
Export Disruptions Trigger Price Decline
The immediate reason behind the price drop lies in the interruption of shipments to West Asian markets.
The escalation of tensions across the region has affected shipping routes and increased logistical uncertainties, which in turn has slowed the movement of agricultural exports from India.
The Middle East remains one of the largest consumers of Indian basmati rice. With exports to the region disrupted, a large portion of the grain that would normally move overseas is now remaining within the domestic supply chain.
This has resulted in additional volumes entering local markets, which traders say is putting downward pressure on prices.
The price correction has occurred within a short period, highlighting how quickly geopolitical developments can ripple through commodity markets.
Shipments Worth Thousands Of Tonnes Stuck
Exporters say the current challenge is largely logistical rather than related to demand.
Industry estimates suggest that around 200,000 tonnes of basmati rice are currently stuck at Indian ports, while another 200,000 tonnes are stranded in transit as vessels avoid shipping routes across parts of the Middle East.
Satish Goel, president of the All India Rice Exporters’ Association, told Reuters that nearly 400,000 tonnes of basmati rice are backed up at ports and in transit, as exporters struggle to move consignments to overseas buyers.
The backlog reflects the difficulties shipping companies are facing as they adjust routes in response to rising security concerns and disruptions in maritime traffic.
Middle East A Key Market For Indian Basmati
The reliance on the Middle East market makes the basmati sector particularly vulnerable to disruptions in the region.
According to Crisil Ratings, exports to the Middle East and other West Asian countries account for around 70-72 per cent of India’s basmati export volume, which stood at nearly 6 million tonnes in the last fiscal year, reported The Financial Express.
Basmati rice is considered a staple food across many of these countries, where a significant share of consumption depends on imports.
Crisil noted that the current disruptions could lead to delays in shipments and may temporarily affect trade volumes for the premium grain.
If the conflict continues for an extended period, exporters could also face delays in payments from buyers in the region. This, in turn, could stretch the working capital cycle for companies involved in the trade.
However, the rating agency said exporters’ credit profiles are expected to remain supported by their relatively healthy balance sheets.
Freight Costs Rise As Ships Avoid Key Routes
Shipping challenges have intensified following the escalation of tensions after US and Israeli strikes on Iran.
Maritime traffic through the Strait of Hormuz, one of the world’s most critical energy and trade corridors, has been affected as insurers withdrew coverage for vessels operating in the region.
As a result, freight costs for shipments heading towards the Gulf have surged.
Exporters say shipping rates have more than doubled in some cases, making it difficult for traders to move cargo economically. The higher freight costs, combined with uncertainty over shipping routes, have forced several exporters to delay shipments.
Many traders say they had already transported large quantities of rice to ports in anticipation of export demand, but are now unable to dispatch consignments because of rising container costs and limited alternative markets to absorb the supply.
In response, exporters have reportedly stopped accepting new orders from Middle Eastern buyers and are focusing instead on fulfilling existing contracts where possible.
Exporters Seek Government Support
As the disruptions deepen, exporters have begun approaching authorities for assistance.
The Indian Rice Exporters Federation (IREF) has written to the Agricultural and Processed Food Products Export Development Authority (APEDA) seeking urgent support to address the logistical challenges.
The federation has warned that exporters are facing an acute shortage of containers, cancellations of vessel calls to Middle Eastern destinations and sharply rising logistics costs.
International freight rates have already increased by around 15-20 per cent, while war‑risk insurance premiums and surcharges for Gulf-bound shipments have also risen significantly.
Bunker fuel costs have also moved higher. Marine fuel oil prices have climbed to around $580 per tonne from roughly $520 earlier.
Exporters say the combination of higher shipping costs and delayed shipments is placing additional financial pressure on the sector.
"Our exporters cannot absorb abrupt freight, fuel and insurance shocks while shipments are delayed or rolled," Dev Garg, vice-president of IREF told PTI.
The federation has requested temporary relief measures, including waivers on port-related charges such as storage and demurrage when cargo is rolled because of vessel cancellations.
Exporters have also asked for flexibility to redirect cargo already in transit and temporary working capital support from banks, similar to measures introduced during the COVID‑19 pandemic.
In addition, the industry has urged the government to issue an advisory recognising the disruption as a **force majeure-type situation**, which could help exporters avoid contractual penalties.
A Sharp Reversal After A Recent Rally
The recent decline in prices marks a sudden reversal for the basmati market.
Only weeks earlier, prices had risen 5-10 per cent in February, driven by strong export demand, particularly from Iran, exporters told The Economic Times.
Government data shows that Iran alone accounts for nearly 40 per cent of India’s basmati rice exports, making it one of the most important markets for the commodity.
The earlier surge in prices had been fuelled by increased buying from Iranian importers amid geopolitical uncertainty. However, the latest escalation in tensions has reversed that trend.
