India’s basmati rice exports likely to remain steady despite Middle East conflict

New Delhi, March 15 : India’s basmati rice export volume is expected to remain steady in FY26 and FY27, with growth of up to 2 per cent over the export volume of 6.06 million tonne (MT) logged last fiscal, despite the ongoing Middle East conflict, a report said on Monday.

Higher demand from Saudi Arabia, Iraq, United Arab Emirates and Yemen will offset losses from drop in exports to Iran, a key market, the report from ratings agency Crisil Ratings said.

Iran accounted for around 14 per cent of the variety’s export volumes last fiscal, while the Middle East and other West Asian countries together accounted for 70-72 per cent. The ongoing conflict has disrupted supply chains and could impact exports, especially to Iran.

If the logistical challenges persist for around a month, basmati rice trade volume might be impacted by 3.5-3.7 lakh tonne, the ratings agency forecasted.

“Indian basmati rice export volume is likely to remain resilient due to 5-6 per cent higher demand expected from other Middle Eastern countries which account for 55-60 per cent of the export volume,” said Nitin Kansal, Director, Crisil Ratings.

Further, exporters will pass on any increase in freight and insurance cost to customers, which will help protect their operating profitability. Balance sheets should remain healthy despite the uptick in debt levels, keeping credit profiles stable, the report noted.

“The working capital cycle of basmati rice exporters is likely to stretch due to logistical hurdles such as inadequate availability of ships, longer transit times and payment-related challenges, resulting in a rise in working capital debt,” the report said.

Basmati rice exporters are also exploring alternative routes to avoid the Strait of Hormuz to ensure supply to the Middle East region. But this could raise transit times, lengthening the working capital cycle, causing a 10-15 per cent increase in working capital requirements.

Basmati rice realisation is expected to be steady in FY27 because of resilience in demand and near-stagnant production of basmati paddy in key producing areas following excess rains, the ratings agency noted.

India is the largest producer and exporter of basmati rice, constituting close to 85 per cent of the global basmati rice volume. Exports constitute nearly two-third of India’s annual basmati rice sales by volume, making the industry highly vulnerable to geopolitics.

—IANS

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