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June 4, 2023

India allows broken rice exports backed by letters of credit issued prior to ban

Due to a sudden prohibition on rice exports that prevented cargoes from being loaded, India will now allow shipments of 397,267 tonnes of broken rice abroad that are secured by LCs granted before 8 September, the ministry declared in a statement on Wednesday.

A bank will offer a letter of credit as assurance that a buyer will pay a seller promptly and in full. It might be made available as a guarantee that, in the event that the buyer is unable to make a payment, the bank will be required to pay the entire or remaining balance of the transaction.

Due to the nature of such dealings, which involves factors like distance, dissimilar regulations in each country, and difficulty getting to know each party personally, the usage of LCs has grown to be an essential part of international trade.

The concession to allow exports against already issued LCs will help traders, according to B.V. Krishna Rao, president of the Rice Exporters Association, as many cargoes were stuck and purchasers were demanding rapid dispatch.

He continued by saying that purchasing from other vendors means paying a “quite high price” for many low-income African nations.

“Indian broken rice was at least 30% cheaper than other origins,” he added.

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