India’s basmati rice exports hit as US-Israel-Iran war disrupts Middle East shipments

Eight days into the escalating war between the US-Israel coalition and Iran, India’s basmati rice exporters are facing a severe crisis. The conflict has disrupted strategic shipping routes in the Gulf, leaving shipments stranded and the Middle East market, India’s largest buyer of basmati rice, shrouded in uncertainty. Traders warn that ongoing hostilities could result in losses worth crores of rupees, hitting the agricultural export sector hard.

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The conflict has disrupted strategic maritime routes, leaving Indian basmati rice shipments to various countries stranded mid-way. This has raised fears of financial losses worth crores of rupees for Indian traders. To understand the situation, The Federal spoke with Ajay Bhalotia, general secretary of the All India Rice Exporters Association, and rice exporter Varun Goyal.

Exporters face mounting losses

Bhalotia shared some figures highlighting the severity of the crisis. According to him, around 400,000 tonnes of Indian rice are currently stuck due to the war. Of this, 200,000 tonnes remain at Indian ports, while an equal quantity of rice is either at sea or at foreign destination ports.

Shipping lines have taken advantage of the situation by imposing heavy “war surcharges.” For new bookings and in-transit cargo, an additional fee of around $2,000 per container is being charged. In Indian rupees, this amounts to a substantial sum. A single container typically carries 24-25 tonnes of rice, making such a high surcharge impossible for small and medium-sized exporters to bear.

Rice exporter Varun Goyal expressed serious concern, noting that exports to the Middle East have nearly come to a standstill. The $2,000 surcharge amounts to about $80 per tonne, a huge burden in a trade already operating on thin margins. This extra cost threatens to erase exporters’ profits entirely, and even previous orders are at risk as many foreign buyers refuse to absorb the added expense. Goyal warned that if the conflict persists, numerous exporters could face bankruptcy. Meanwhile, shipments that have already reached their destinations are encountering rising disputes over delivery and payment.

Strait disruptions hit exports

Geographically, the war is affecting some of the world’s busiest trade routes. Goods bound for Iraq, Kuwait, and Iran pass through the Strait of Hormuz, which has now been declared unsafe for shipping due to the conflict.

According to Goyal, Iran has traditionally been one of the largest buyers of Indian basmati rice. With shipments to the country now halted, payment cycles and trade transactions have been severely disrupted. This has led to “distress selling” in the domestic market, where rice that would normally fetch premium international prices is being sold at much lower rates. Traders are being forced to offload their stock at steep discounts to manage the situation.

Packaging costs squeeze margins

The impact of the war is not limited to shipping or maritime routes. Volatility in crude oil prices has also affected supporting industries, particularly the packaging sector, as the cost of raw materials derived from petroleum products has surged. Goyal noted that polypropylene (PP) bags used for rice packaging have become significantly more expensive.

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The price of PP granules has jumped by ₹50 per kg, increasing packing costs by ₹500-750 per tonne. The market is also facing shortages of raw materials. Even if exporters wish to ship rice to other markets, such as Africa, packaging costs are now higher, weakening India’s competitiveness in the global rice market.

Middle East exports hit hard

In terms of numbers, India’s annual basmati rice exports range between $4.5 and $5 billion. About 80% of this total is shipped to Middle Eastern countries, including Saudi Arabia, the UAE, Iraq, and Kuwait, where Indian basmati rice enjoys high demand. Currently, trade with all these countries has been severely disrupted due to the war.

According to Bhalotia, insurance companies are also hesitant to take on risk amid fears of missile attacks on ships. Exporters are avoiding new orders and adopting a “wait and watch” approach. There is hope that if the war ends early, the losses can be mitigated.

(This article was originally published in The Federal Desh.)