US tariff cut to 18%, Indian rice exporters see hope in basmati

Chandigarh: The proposed reduction in US import tariff on Indian basmati rice from 50% to 18% has brought hope to the rice industry, as stakeholders in Punjab expect the move to restore market competitiveness and provide relief to exporters, millers, and farmers.The tariff adjustment follows a trade agreement between Prime Minister Narendra Modi and President Donald Trump on Monday, which lowers the reciprocal tariff to 18% and waives a 25% punitive levy previously linked to India's Russian oil imports. It effectively lowers previous tariff levels, which reached as high as 50% (25% reciprocal tariff and an additional 25% punitive levy). The development comes at a time when geopolitical tensions persist persisted between the US and Iran, a country that traditionally has been the second-largest importer of Indian basmati rice. An ongoing internal crisis in Iran has led to payment delays, a decline in export orders, and a reduction in domestic prices of basmati.Ranjit Singh Jossan, vice-president of The Punjab Basmati Rice Millers & Exporters Association, said the reduction in US tariff was "like a breath of fresh air" for the industry. He noted that while the move offered immediate relief to exporters and millers, it also raised hopes of better prices for farmers during the next season. In Aug 2025, the US imposed a 50% tariff on Indian products, including basmati, and prices of Indian basmati rose sharply in the American market. As a result, Indian exporters lost competitiveness against rivals, particularly Pakistan, leading to the cancellation or reduction of several export orders. "Rising export costs put financial pressure on millers and traders, pushing the basmati market downward. This decline had a direct negative impact on the prices received by farmers," said Jossan. Over the last two years, the basmati industry has been hit by multiple challenges. These included the imposition of a minimum export price (MEP) by the Indian govt, the Iran–Israel conflict, ongoing tensions between the US and Iran, reduced demand in international markets, policy uncertainty, and broader geopolitical instability. "Due to the high tariff, the US market—considered a key destination for Indian basmati with an estimated annual demand of around 250,000 tonnes—was almost slipping out of India's hands," he said.The move is likely to bring better prices for basmati farmers next season. "The combined effect of reduced tariffs and rising demand from new markets is expected to directly benefit growers. An increase in exports would likely enable millers to purchase basmati from farmers at better prices," said Amarjit Singh, a rice exporter from Amritsar. On Tuesday, Union commerce and industry minister Piyush Goyal hailed the new trade agreement with the United States, highlighting that the 18% tariff gave India a competitive edge over neighbours and rivals, noting that it was lower than the rates faced by Pakistan (19%), Bangladesh (20%), and China (34%). The new agreement reduced the baseline tariff to 18% and includes a waiver of the 25% punitive oil penalty. AFGHANISTAN BUYS BASMATI FROM BHARATWhile the high US tariff acted as a dampener, Afghanistan emerged as a key support for Indian exporters. Traditionally dependent on Pakistan, Afghanistan is now sourcing more basmati rice from India due to strained relations and the complete closure of the Afghanistan–Pakistan border. This shift resulted in strong demand from Afghanistan, helping the rice sector during a challenging phase.