Dou­ble Whammy for Tea Ex­ports

Trade to two ma­jor mar­kets for In­dia – Iran and UK – may come down soon

The Economic Times - - Finance & Commodities - Su­tanuka.Ghosal @times­group.com

Kolkata: In­dian tea ex­porters are fac­ing un­cer­tainty from two of its ma­jor mar­kets –– Iran and UK. The UK is flooded with cheaper grade tea from Kenya which is spoil­ing In­dia’s chances there. Sim­i­larly, In­dia is fac­ing a prob­lem in the pay­ment mech­a­nism with Iran as the coun­try wants tea trade to be con­ducted in dol­lars in­stead of ru­pees.

Tea ex­ports fell 5.19% in 2016 to 216.79 mil­lion kg. The unit price re­al­i­sa­tion in 2016 was the same as the pre­vi­ous year in dol­lar terms but higher by 4.8% when con­verted to ru­pee terms.

Binod Bansal, a lead­ing tea ex­porter to Iran, said: “In the last one month, ex­porters are fac­ing prob­lem re­gard­ing pay­ment mech­a­nism with Iran, and tea al­ready bought can­not be shipped out. Ira­nian im­porters said ru­pee trade is likely to come to a halt on March 31. US dol­lar can- not be traded due to sanc­tions.”

He said the cen­tral banks of the two coun­tries should find a so­lu­tion oth­er­wise Sri Lankan tea would make ma­jor in­roads into Iran. “We are yet to get any di­rec­tion from the Re­serve Bank of In­dia,” Bansal said.

Iran had im­ported 22.75 mil­lion kg of pre­mium Sri Lankan ortho­dox teas in 2016. “We are plan­ning to send a del­e­ga­tion to Iran to sort out the is­sue some­time in April. For ortho­dox tea ex­ports, we are also ex­plor­ing the new mar­ket of Chile,” said Azam Monem, chair­man, In­dian Tea As­so­ci­a­tion (ITA).

Traders are also wor­ried about the UK mar­ket. “Ex­ports to the UK post-Brexit may be­come a chal­lenge given that the pound is be­com­ing weaker while price of In­dian tea is go­ing up on ac­count of the rise in cost of pro­duc­tion. In 2016, Kenya, which pro­duced 73 mil­lion kg of more teas, had sold more tea to the UK mar­ket com­pared to In­dian tea. We have to wait till June to see whether im­porters from UK show in­ter­est in lift­ing teas,” said Anshuman Kanoria, chair­man, Cal­cutta Tea Traders As­so­ci­a­tion. In 2016, In­dian ex­ports to UK dropped by 20% to 15.78 mil­lion kg.

ANSHUMAN KANORIA Chair­man, Cal­cutta Tea Traders As­so­ci­a­tion Ex­ports to the UK postBrexit may be­come a chal­lenge given that the pound is be­com­ing weaker while price of In­dian tea is go­ing up on ac­count of the rise in cost of pro­duc­tion

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