Iran: Refund for trade to promote rice and tea exports to Russia and Iran

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The Reserve Bank of India’s move to set up a mechanism to settle international trade in rupees will boost tea and basmati rice exports to Russia and Iran, where they have faced payment problems. Russia and Iran are major buyers of Indian tea, and the latter is also a major destination for basmati rice. Both countries are facing western sanctions.

India exports around 45 million kg of tea to Russia every year. But due to the ongoing war between Russia and Ukraine and US and European sanctions, tea exports to the country fell 10% from January to April compared to the same period last year.

Mohit Agarwal, director of Asian Tea, a leading tea export company, said: “The government’s move will help solve the payment problem. Not only will it increase tea exports to Russia and Iran, but it will also help India increase its tea exports to the UAE, Kazakhstan and China and will remove currency risk from our balance sheets.”

“Overseas buyers can now open a Vostro account and make payments in INR to Indian exporters. The foreign exchange risk is transferred to the overseas buyer as the rupee amount is fixed (in INR since invoicing),” explained Abhishek Goenka, Founder and CEO, IFA Global.

In 2019, India exported 53 million kg of tea to Iran. Since the US imposed sanctions on Iran, India has not been able to engage in dollar-denominated trade. Therefore, a rupee-riyal trading mechanism was introduced in 2018.

Below that, oil refiners from India would pay in Indian rupees

and for importing crude oil from Iran, and the fund was used to clear duties from Iranian exporters.

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