US Slashes Import Tariff on Indian Basmati Rice to 18%, Offering Hope to Punjab's Rice Sector
The proposed reduction in United States import tariffs on Indian basmati rice from a steep 50% to a more manageable 18% has injected a wave of optimism into India's rice industry. Stakeholders across Punjab, the heartland of basmati cultivation, anticipate this strategic move will rejuvenate market competitiveness and deliver much-needed relief to exporters, millers, and the farming community at large.
Trade Agreement Paves Way for Competitive Revival
This significant tariff adjustment stems from a recent trade agreement between Prime Minister Narendra Modi and former US President Donald Trump, finalized on Monday. The agreement not only lowers the reciprocal tariff to 18% but also waives a separate 25% punitive levy that was previously imposed in connection with India's oil imports from Russia. This effectively dismantles the previous tariff structure, which had soared to as high as 50%, combining the 25% reciprocal tariff with the additional 25% penalty.
Ranjit Singh Jossan, Vice-President of The Punjab Basmati Rice Millers & Exporters Association, described the development as "like a breath of fresh air" for the beleaguered industry. He emphasized that while the move provides immediate respite to exporters and millers, it also kindles hopes for improved price realizations for farmers in the upcoming season.
Addressing Past Challenges and Lost Ground
The industry's relief is palpable, given the severe challenges faced over the past two years. In August 2025, the US imposition of a 50% tariff on Indian products, including basmati, caused prices of Indian basmati to skyrocket in the American market. This eroded India's competitiveness against rivals, notably Pakistan, leading to the cancellation or scaling back of numerous export orders.
"Rising export costs put immense financial pressure on millers and traders, triggering a downward spiral in the basmati market. This decline had a direct and negative impact on the prices received by our farmers," explained Jossan. He highlighted that the high tariff had jeopardized access to the crucial US market, which has an estimated annual demand of around 250,000 tonnes for Indian basmati.
The sector's woes were compounded by a confluence of other factors:
- The Indian government's imposition of a Minimum Export Price (MEP).
- Geopolitical instability, including the Iran–Israel conflict and ongoing US-Iran tensions.
- Reduced demand in international markets and broader policy uncertainties.
Geopolitical Context and Emerging Opportunities
This tariff revision arrives against a backdrop of persistent geopolitical tensions, particularly between the US and Iran. Iran has traditionally been the second-largest importer of Indian basmati rice. However, an ongoing internal crisis in Iran has resulted in payment delays, a decline in export orders, and a reduction in domestic basmati prices, further straining the Indian export landscape.
In a silver lining amidst these challenges, Afghanistan emerged as a vital support for Indian exporters. Historically reliant on Pakistan, Afghanistan has increasingly turned to India for basmati rice supplies. This shift is driven by strained bilateral relations and the complete closure of the Afghanistan–Pakistan border, generating strong demand that helped sustain the Indian rice sector during a difficult period.
Future Outlook and Government Endorsement
Industry experts are optimistic about the ripple effects of the tariff cut. Amarjit Singh, a rice exporter from Amritsar, noted, "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 in the next season."
The move has also received strong endorsement from the Indian government. On Tuesday, Union Commerce and Industry Minister Piyush Goyal hailed the new trade agreement with the United States. He underscored that the 18% tariff provides India with a distinct competitive advantage over neighboring rivals, pointing out that it is lower than the rates applicable to Pakistan (19%), Bangladesh (20%), and China (34%).
This strategic tariff reduction marks a pivotal moment for India's basmati rice industry, offering a pathway to reclaim lost market share, stabilize domestic prices, and secure a more prosperous future for all stakeholders in the agricultural value chain.
