India-Iran wheat export programme hits dead end

Updated on Jan 27, 2013 11:43 PM IST

Almost-finalised plans for exporting Indian wheat to Iran, touted as a major initiative as part of rupee-payment for Iran oil, remain a non-starter. Jayanth Jacob reports.

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Hindustan Times | By, New Delhi

Almost-finalised plans for exporting Indian wheat to Iran, touted as a major initiative as part of rupee-payment for Iran oil, remain a non-starter.

Under the rupee payment mechanism, 45% of the oil import bill from Iran is credited in rupees and at present Iran has US $5 billion in rupees in the account from this. The rupee trade for oil means Iran has to make use of that money in India. Out of the US $15.94 billion in 2012, Indian exports accounted for just US $2.40 billion.

With US sanctions looming large over Iran for its nuclear programme, New Delhi is worried about its export basket not expanding to make use of the rising rupee payment.

The plan was agreed upon during prime minister Manmohan Singh's visit to Iran last year, but both sides are yet to sort out the quality issues so they can enter into a long-term arrangement for wheat export.

The quality issue is with regard to a fungal disease, known as 'Karnal bunt', in Indian wheat. Iran had stopped buying wheat from India in 1996 alleging high levels of Karnal bunt in grain.

India has subsequently argued that its wheat has internationally permissible levels of Karnal bunt and that Iran was using a similar yardstick of quality for wheat from USA.

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