How the Middle East war has brought MP’s basmati exports to a standstill

War in the Middle East Grinds Basmati Trade to a Halt

India's prized basmati rice exports, a cornerstone of the nation's agricultural economy, have been brought to a virtual standstill by the intensifying conflict involving the US, Israel, and Iran. Around 400,000 tonnes of the aromatic long-grain rice are now stranded at Indian ports or stuck in transit, as shipping routes through critical chokepoints like the Strait of Hormuz become too dangerous for commercial vessels. Exporters from major hubs in Punjab and Haryana, who rely heavily on Middle Eastern buyers, are watching helplessly as their shipments pile up. The war has not only disrupted physical movement but also frozen new orders, turning what was a booming trade into a nightmare of mounting losses and uncertainty. This crisis comes at a particularly tough time, following a record harvest that had exporters optimistic just weeks ago.

The Middle East has long been the lifeblood of India's basmati market, absorbing the lion's share of the country's annual output. In the financial year 2024-25, India shipped out about six million tonnes of basmati rice, generating billions in revenue, with 60 to 80 percent destined for countries like Saudi Arabia, the UAE, Iraq, Kuwait, and Iran. Iran alone accounts for a significant chunk, often up to 20 percent of exports, making it a pivotal buyer. Families across these nations savor the fluffy, fragrant grains in traditional dishes during festivals and daily meals, driving consistent demand. But now, with hostilities escalating, ports in the Gulf are in chaos, buyers are balking at delays, and the once-reliable trade pipeline has clogged up completely.

Soaring Costs and Stranded Cargoes Squeeze Exporters

Freight rates have skyrocketed, with Asia-to-Middle East container costs jumping to $3,500 to $4,500 per unit, more than double pre-war levels. War-risk surcharges alone add about $2,000 per shipment, translating to roughly $80 per tonne—a crippling hit for an industry running on razor-thin margins. Bunker fuel prices have climbed from $520 to $700 per tonne, insurance premiums are through the roof, and container availability is scarce as shipping lines reroute around danger zones. Vessels that once took 25-30 days via the Suez Canal now detour around the Cape of Good Hope, stretching journeys to 35-45 days or more. Domestic basmati prices have dipped by 6 to 10 percent amid the glut at Indian ports, further eroding profitability. Exporters are grappling with payment disputes, delayed deliveries, and the looming threat of invoking force majeure clauses to dodge contract penalties.

"Exports to the Middle East have nearly come to a standstill. The $2,000 surcharge is a huge burden, threatening to wipe out our profits entirely. If this drags on, many of us could face bankruptcy," said Varun Goyal, a prominent rice exporter.

Industry leaders from groups like the All India Rice Exporters' Association and the Indian Rice Exporters Federation, representing thousands of traders, are sounding the alarm. They report that around 200,000 tonnes are trapped in transit and another equal amount at ports. The Strait of Hormuz, through which goods flow to Iraq, Kuwait, and Iran, has been declared unsafe, while Red Sea routes face threats from groups like the Houthis. Even exports to North America and Europe are indirectly affected by these bottlenecks. Exporters are urging the government for relief measures, such as waiving port charges and recognizing the war as a force majeure event to protect cash flows and contracts.

Broader Implications for India's Agri-Exports

This turmoil extends beyond basmati, rippling through other agricultural trades. Shipments of pulses, tea, and even apples to Iran and neighboring countries are under pressure, with Iran's depreciating rial already weakening buyer power even before the strikes. The conflict has halted cargo vessels mid-voyage, stranding not just rice but a range of goods. For basmati heartlands in Punjab and Haryana, the stakes are enormous—a ₹50,000 crore industry now faces potential crores in losses. Ramadan, typically a peak demand period, has seen no uptick this year as uncertainty reigns. Traders who stocked up after the bumper harvest are now staring at rotting stockpiles and unpaid bills, with some bracing for invocation of emergency clauses.

As the war shows no signs of abating, the full economic fallout remains unclear, but the immediate pain is palpable. Exporters are lobbying hard for intervention, from curbing unjust surcharges to expediting alternative routes. The saga underscores how fragile global supply chains can be, especially when geopolitical fires erupt in vital trade corridors. For now, India's basmati exporters are in survival mode, hoping for de-escalation to salvage a vital lifeline.

In summary, the Middle East war has stranded 400,000 tonnes of basmati rice, spiked costs dramatically, and halted trade with key markets accounting for most of India's exports, leaving growers and traders in dire straits amid calls for urgent government aid.