Relevance: GS II (International Relations – Global Policies) & GS III (Economy – Agri-Exports) | Source: The Indian Express

1. The Double Shock for Farmers

Indian Basmati exporters are facing a “perfect storm” that threatens the livelihoods of farmers in Punjab and Haryana.

  • Shock 1 (External): The US has threatened a 25% tariff on any nation trading with Iran. This fear of “Secondary Sanctions” has frozen new contracts.
  • Shock 2 (Internal): Iran has stopped providing subsidized dollars to its importers for buying rice. This has forced Iranian buyers to pay high open-market rates, making Indian Basmati prohibitively expensive there.

2. Why Iran Matters? (The Stakes)

  • The “Premium” Market: Iran is India’s third-largest Basmati buyer (after Saudi Arabia and Iraq).
    • The numbers: In 2024-25, exports to Iran stood at $753 million.
    • Recent Surge: Ironically, before this shock, exports to Iran had jumped ~21% this year, overtaking Iraq. That recovery is now dead in the water.
  • The Fallout: Prices of popular varieties like Pusa-1509 and Pusa-1718 (preferred in Iran for their length) have already crashed in Haryana’s mandis due to the uncertainty.

3. The “Dubai Route” Risk

A large chunk of Basmati goes to Iran indirectly via the UAE (re-routed shipments). With the new US tariff threat, Dubai traders are also backing off, choking even this “unofficial” lifeline for Indian exporters.

UPSC Value Box

Concept / Term

Relevance for Prelims

Secondary SanctionsWhen a country (like the US) penalizes third-party nations (like India) for trading with a sanctioned enemy (like Iran). It forces countries to choose between trading with the US or the sanctioned state.
Rupee-Rial MechanismA special payment arrangement to bypass US banking sanctions. Indian importers pay for Iranian oil in Rupees into UCO Bank, which is then used to pay Indian exporters sending rice/tea to Iran.
GI Tag (Basmati)Basmati is a Geographical Indication product linked to the Indo-Gangetic Plains (Punjab, Haryana, West UP, J&K, HP, Delhi, Uttarakhand). It cannot be grown in MP or the South.

Q. With reference to India’s agricultural exports and trade mechanisms, consider the following statements:

  1. Basmati Rice carries a Geographical Indication (GI) tag valid for the entire territory of India.
  2. The “Rupee-Rial Mechanism” was established to facilitate trade with Iran in the face of international sanctions.
  3. West Asian nations like Saudi Arabia and Iran are among the top export destinations for Indian Basmati rice.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 3 only

Correct Answer: (c)

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