Exporters may face losses as Iranian currency rial depreciates.

NEW DELHI: Indian exporters who routed goods through transit ports such as Dubai are worried that they may be forced to give heavy discounts to buyers as the Iranian currency, rial, has lost half its value since September.

"We are worried about the goods already shipped to Iran through Dubai as the buyers are now asking for huge discounts with almost 50%-60% depreciation in their currency in the last few months," said Vijay Setia, a Basmati exporter.

Export remittances of more than $1 billion of tea and Basmati were stuck after the RBI last year suspended settlements through the Asian Clearing Union (ACU), a payment arrangement for Asian countries, following US sanctions on Iran.

A number of exporters continued to trade through Iranian companies in Dubai which bought goods on a 90- or 120-day credit from Indian exporters and shipped it to Iran. But now, at the time of making payments, the Iranian buyers are asking for discounts citing a big depreciation in their local currency, rial.

"If the issue is not sorted out, exporters will face huge losses. We are trying to get The Indian Embassy to intervene," Setia said. Other exporters, however, are quite satisfied with the new rupee payment mechanism through which exporters will get paid in rupees under an arrangement between Iran's Bank Parsian and India's UCO Bank.

Under this, the Iranian bank has deposited some seed money with the Indian bank that will be used to make payments to exporters till the oil pool account gets operational.

"Our company has been selling machinery to Iran, but we had to stop once the payment problem began. Now we can resume our exports," a Delhi-based engineering goods exporter said.

If the money gets exhausted before the oil pool is operational, the Iranian bank would put in more money, a government official told ET.

India, too, is doing its best to make the new arrangement click. The commerce department will soon make suitable changes in the foreign trade policy that will make exporters to Iran eligible for all sops that exporters are entitled to when they earn in dollars, the official said.

"We do not want to penalize exporters for not being able to export in dollars. We are going to come up with a suitable notification soon," the official said.

"Such positive action by the government will encourage exporters to aggressively export to Iran and optimise utilisation of rupee balance in oil import pool," said Rafeeque Ahmed from Fieo.

India and Iran have agreed to settle 45% of their oil trade in rupees and boost exports to narrow their trade gap. While India imports goods (mostly oil) worth $12 billion from Iran, its exports to the country are worth $2 billion.

A business delegation, which would also include officials from the commerce department, will visit Iran on March 10 to scout for opportunities to increase exports. Higher exports from India would allow the two sides to offset payments to a large extent and leave smaller sums to be settled through foreign banks or rupee payments.

Foreign banks are refusing to do business with Iran for fear of sanctions being imposed on them by the US and Europe.

Source : economictimes.indiatimes.com