Israel-Iran conflict threatens India's agri exports

Mint

23-06-2025

NEW DELHI
:
The escalating conflict between Israel and Iran is clouding the outlook for India's agricultural exports, with experts warning of potential disruptions to trade routes, payments, and shipments, particularly via Iran's Bandar Abbas port, a key gateway for India to Afghanistan and Central Asia.
Exporters are also calling for urgent action to scale up the Chabahar Port as a strategic alternative to safeguard India's regional trade links.
'Payment mechanisms—already constrained by US curbs—may tighten further, and heightened security risks in the Gulf could push up insurance premiums and delay shipments," said Ajay Srivastava, a former trade services official and co-founder of the economic think tank Global Trade Research Initiative (GTRI).
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'Perishable goods like rice, bananas, and tea are particularly at risk," he added.
India's exports to Iran stood at $1.24 billion in 2024-25, with basmati rice alone accounting for $753.2 million. Other major exports include bananas ($53.2 million), soybean meal ($70.6 million), bengal gram ($27.9 million), and tea ($25.5 million).
However, the risk of a prolonged conflict could choke this trade pipeline.
Hit on exports
To be sure, Basmati rice exports have already taken a hit.
Nearly 100,000 tonnes of basmati shipments bound for Iran are stranded at Indian ports, as exporters have put deliveries on hold amid growing uncertainty.
Iran imports nearly one million tonnes of basmati rice from India annually, accounting for about 20% of India's total basmati exports, said Sushil Kumar Jain, vice president, All India Rice Exporters Association.
Jain said payment dues of ₹1,500 crore to Indian exporters are stuck amid the ongoing conflict. 'If the conflict persists for a longer period, the exporters may face huge losses, which is difficult to quantify at the moment, but if it settles down in a few days, then we don't see major losses," he added.
The conflict's ripple effects are also being felt in the sugar trade. While direct sugar exports to Iran are limited, India routes shipments to Afghanistan through Bandar Abbas due to its fraught trade relations with Pakistan.
'Operations at the port are currently stable, but any escalation could disrupt sugar movement to Afghanistan," said Deepak Ballani, director general, Indian Sugar and Bio-energy Manufacturers Association (ISMA).
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Other commodity markets are also on edge. For instance, edible oil prices have jumped $40-50 in just a week, due to supply chain strains and energy cost concerns, according to the Solvent Extractors' Association of India (SEA).
Alternative route
Meanwhile, rising tensions have prompted experts to underline the growing strategic urgency of scaling up the Chabahar port as India's alternative trade gateway to Afghanistan, Central Asia, and Eurasia.
Bandar Abbas, Iran's largest commercial port located on the Strait of Hormuz, is of significant strategic and economic value not just for Iran but also for regional players like India.
For India, the port has long served as a key transit point for exporting goods, particularly to landlocked Afghanistan and Central Asia, bypassing Pakistan.
The rising tensions may threaten operations in Bandar Abbas, so the Chabahar port is no longer just an option, as it is becoming a strategic imperative for India to connect to Afghanistan, Central Asia, and Eurasia, said Ajay Sahai, director general and CEO of the Federation of Indian Export Organisations (FIEO).
'Rising Israel-Iran tensions reinforce the urgency to operationalize, scale, and integrate Chabahar into India's core trade corridors, which is time and cost-effective," Sahai said.
'India now has an opportunity to shape the future of regional connectivity. Chabahar could emerge not just as a port, but as India's diplomatic and logistical gateway to West and Central Asia," he added.
The news agency Press Trust of India on Sunday reported that Indian exporters urged the Centre to shift cargo operations from the Bandar Abbas port to the Chabahar port at a high-level meeting chaired by commerce secretary Sunil Barthwal.
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The meeting brought together senior officials from the ministries of commerce, petroleum, shipping, revenue, and financial services, along with representatives from shipping lines and airport authorities, highlighting the urgency of safeguarding strategic trade corridors, the news agency reported.
The spokesperson of the ministry of agriculture and farmers' welfare and the ministry of commerce and industry didn't respond to emailed queries.
Challenges ahead
However, an immediate diversion of cargo may not be practical due to infrastructure constraints, experts warned.
An immediate diversion is not feasible, as the existing infrastructure at Chabahar is inadequate to handle a sudden spike in cargo and container volumes, said Anil Devli, CEO of the Indian National Shipowners' Association (INSA).
'Even roads connecting the port to the nearest highway are not proper, which would make the onward journey both difficult and expensive," Devli said.
Despite recent improvements, Chabahar's handling capacity remains modest. The port managed about 80,000 TEUs and three million metric tonnes (MT) of bulk cargo in 2024-25—up from 64,000 TEUs and 2.12 MT in 2023-24, and just 9,000 TEUs and 2.08 MT in 2022-23, according to the data from the ministry of shipping.