Indian rice exporters are facing unprecedented challenges as global trade disruptions intensify pressure on a sector that accounts for nearly 20% of India's agricultural exports. The latest blow comes from a 25% tariff imposed by the United States on trade partners of Iran, significantly impacting one of India's most crucial basmati rice markets.

Export Challenges Intensify with New US Tariff

Rajesh Paharia, Chief Manager–Business Development at Kribhco Agri Business, highlighted the severe impact of recent trade policy changes on Indian rice exporters. Iran represents the second-largest export destination for Indian basmati rice, making the new US levy particularly damaging for the sector.

"This 25% increase, tariff which has been levied, that also is going to be impacting the rice exports from India to Iran," Paharia explained. The tariff has compounded existing operational challenges that were already straining exporters' capabilities.

Industry Seeks Government Support

In response to mounting pressures, rice exporters have intensified engagement with Indian authorities to seek clarity and protection. Paharia revealed that industry representatives recently approached the Agricultural and Processed Food Products Export Development Authority (APEDA) for guidance.

The industry is awaiting direction from the Ministry of Commerce through APEDA on several critical areas:

• Risk mitigation strategies
• Payment security mechanisms
• Protection for consignments already in transit

Domestic Market Shows Contrasting Strength

While export markets face headwinds, India's domestic rice sector presents a markedly different picture. Despite bumper crop production that would typically depress prices, domestic rice prices have been rising due to evolving consumer preferences.

"A lot of rice millers, the Basmati ones, have come out with glycemic, low-glycemic rice and a lot of added-value rice. So, the consumption in India has persistently been increasing," Paharia noted.

This domestic strength contrasts sharply with global non-basmati rice prices, which have fallen to eight-year lows due to oversupply conditions.

Future Market Outlook and Challenges

Looking ahead, Indian rice exporters face structural challenges as traditional markets evolve. Countries like Nigeria are moving towards self-sufficiency, potentially reducing import demand over the next decade. However, the US market remains relatively resilient due to strong preferences for Indian rice among expatriate communities.

Paharia emphasized the critical need for sustained policy support, stating: "An Indian rice holds almost 20% of the agriculture exports. So, they have to have blessings on all the exporters, so we survive, and we cater to the whole of the world."

The rice export industry's ability to navigate these complex trade dynamics will depend significantly on government support and successful diversification into new markets while maintaining competitiveness in existing ones.

Indian basmati rice exporters are grappling with mounting challenges as political unrest in Iran creates payment disruptions and pricing pressures across the trade corridor. The situation has been further complicated by recent tariff threats from the US, creating a complex web of risks for one of India's key agricultural export sectors.

Price Decline and Payment Challenges

Basmati rice prices have experienced significant downward pressure, declining by ₹5-8 per kg across key varieties over recent weeks. This price erosion stems directly from Iranian buyers' struggles with payment settlements amid the country's domestic instability.

Iranian importers have communicated their inability to honor existing remittance commitments, forcing Indian exporters to reassess their market exposure. The Indian Rice Exporters Federation has responded by advising members to exercise caution when shipping to Iran and to closely evaluate payment risks before proceeding with new orders.

Trump's Tariff Threat Adds Complexity

The trade disruption has gained an additional geopolitical dimension with Trump's announcement of a 25% tariff on countries that continue conducting business with Iran. This declaration directly links Iran-related trade to access to the US market, creating a potential dilemma for Indian exporters.

While India's rice exports to the US already face tariffs of up to 50%, limiting direct exposure to this new threat, exporters identify broader systemic risks. The primary concern lies in potential risk aversion among banks, insurers, and logistics providers, which could further complicate payment mechanisms and shipping arrangements.

Strategic Market Significance

Iran's importance to India's basmati rice sector cannot be understated. The country ranks among India's largest basmati markets, with exports valued at $468 million in FY26. This represents a substantial portion of the sector's international trade portfolio.

The broader India-Iran trade relationship encompasses multiple agricultural and pharmaceutical products:

• Rice (primary export commodity)
• Tea and sugar products
• Pharmaceutical supplies
• Other agricultural commodities

Industry Response and Outlook

The Indian Rice Exporters Federation has taken a proactive stance in addressing these challenges, providing guidance to member exporters on risk management strategies. The organization emphasizes the need for enhanced due diligence in payment arrangements and shipping decisions.

Exporters anticipate that price softness may persist until payment visibility improves significantly. The sector's recovery trajectory will largely depend on two critical factors: the enforcement intensity of US tariff threats and the potential emergence of exemptions or policy clarifications that could provide relief to affected trade relationships.

The current situation underscores the vulnerability of agricultural export sectors to geopolitical developments and highlights the interconnected nature of international trade relationships in today's global economy.