New Delhi launched the rupee settlement mechanism from April, 2012 for avoiding US and European Union sanctions under which state-owned UCO bank was appointed as the nodal agency from India.
UCO bank has a tie-up with four Iranian banks Parsian, Pasargad, Saman and EN for carrying out settlements of dues.
As per official data, Iran imported 3.2 million tonnes of aromatic rice during the 2011-12 period. Of the total imports, close to 1.5 million tonnes is shipped from India for meeting Irans domestic demand.
Industry sources said Basmati rice exporters from India could not settle their dues with Iran due to American sanctions after a payment route through Dubai was closed earlier last year. The payment settlement mechanism has considerably reduced the time taken for settlement. However, there are teething problems, MP Jindal, president, All India Rice Exporters Association (AIREA) told FE.
Jindal said the time taken for settlement of payment once the rice consignment reaches Tehran ranges from 3045 days, which should be brought down to 15 20 days.
The two countries launched a payment mechanism June last year to avoid western sanctions by essentially exchanging Iranian oil for a range of Indian goods, including rice, soymeal and pharmaceuticals.
Indian oil importers deposit their payments into an Indian bank, while rice traders and other exporters withdraw funds once their shipments have been received.
However, the rupee payment mechanism is not allowed in non-oil import from Iran and private remittances.
As per the Agricultural and Processed Food Products Export Development Authority (Apeda) data, the country's cumulative exports of Basmati rose from a modest R2,792 crore during the 2006-07 period to more than R15,082 crore worth of exports for 2011-12, a massive five-fold rise.
The exports are expected to cross the R16,000-crore mark during current fiscal. This rise was mainly because of a huge demand for the Pusa 1121 variety of Basmati rice from Iran.
Meanwhile, India and Iran are expected to have a joint commission meeting shortly for discussing issues concerning settlement of dues in bilateral trade. Issues related to payment for oil, agri products and other security-related matters would be taken up in the meeting," said a source.
Iran is an important source of India's crude oil imports and a provider of trade routes to Central Asia, Russia and Afghanistan. It continues to be a major supplier of petroleum products and the recent reduction in oil imports from Iran was primarily due to market factors and payment-related issues.