Indian tea companies optimistic about boosting trade with Iran
Indian tea companies are optimistic about increasing trade with Iran after Uco Bank clarified to tea companies that the rupee-rial trade agreement with Iran will continue.
In 2018, tea exports to Iran, India’s second-most important tea market, shot up only by around 3.5 percent in terms of volume, wrote business-standard.com.
However, Indian producers and suppliers argued that the low growth was due to a lack of clarity on whether the rupee-rial trade agreement would continue in the face of US sanctions on this major oil-producing country, and if at all payments would come on time.
“However, it is clear now and Uco Bank is handling the payments. Iran, as a market, is also expected to grow by 15-20 percent this year,” Vivek Goenka, chairman at the Indian Tea Association (ITA) said.
The ITA, as well as exporters to Iran, reasoned that during 2016 and 2017, when the threat of US sanctions was not looming over Iran, India had a stabilized tea trading environment with this country. Tea exports surged by over 74 percent at 29.57 million kg.
Data from the Tea Board of India also highlights that after India got an exemption from the US to trade with Iran, exports to this country increased by over 109 percent at 5.9 million kg in January this year.
During 2011-12, after the former Obama administration in the US effected its previous trade sanctions on Iran, the Indian and Iranian governments put in place the rupee-rial payment mechanism for trade, where up to 45 percent of India’s purchases of Iranian oil could be paid back in rupees, covering tea, rice, medicine and commodities not sanctioned by the US.
Although $8 billion of the $10.6 billion trade between India and Iran comprises oil imports from Iran, Indian exports to this country – primarily tea and basmati rice – make up for $ 2.6 billion.
Goenka, who is also the director at Warren Tea Ltd., expects that the surge in Iranian demand for Indian tea, particularly the orthodox variant, will help improve prices by at least 10 percent this year. Tea data shows that in January, which is one of the leanest months in the tea industry, the average price of tea, per kilo, exported directly to Iran, improved by 5.5 percent.
“The uptick in demand is expected to continue in the second half of the year as well,” Atul Asthana, CEO and managing director at the Camellia PLC said.
Moreover, according to Asthana, US sanctions will also help India further its direct exports to Iran and replace Ceylonese tea from Sri Lanka.
In the prime orthodox tea market (handmade tea in the traditional method), Ceylonese tea primarily competes with Indian tea.
In November last year, several major tea companies in India had curbed production of orthodox teas over uncertainty in trade with Iran.