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RBI’s Payment Norms May Hit Tea Exports to Iran |
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The tea industry fears that the recent RBI circular with regard to the settlement issue with Iran will hit India’s tea exports to that country.
RBI recently issued instructions that imports of oil from Iran should be settled outside the Asia Clearing Union mechanism under which the payments can be made in the dollar as well as other currencies such as the euro.
Subsequently, the scope of the instruction was extended also to cover all current account trade with Iran. The payment in dollar is difficult now following the US Government’s stand on Iran.
Tea export trade with Iran is largely backed by letter of credit (L/Cs) that offers appropriate security of remittances to the exporters as settlement is made through major Indian commercial banks.
These commercial banks operate through correspondent banks in Iran on behalf of them they honour L/Cs. Following the RBI circular, the Indian banks are reluctant to honour L/Cs, it is learnt.
In 2008, the exports were to the tune of about 16 million kg (mkg) dropped around 11.5 mkg in 2009 due to the global slowdown. It started picking up again this year. Between January and May 2010, the orthodox tea exports toIran were five mkg compared with 3.5 mkg in the same period previous year.
Source : gscurrentaffairs.com
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