Indian must look beyond traditional markets such as Russia. With Russia, rupee-rouble payment can be activated
The Indian tea industry is one of the major sectors to have been hit by many geopolitical disturbances. First was the Gulf war. Iraq, a big orthodox tea market, was badly hit by the war and UN sanctions. However, Indian tea got the benefit of the UN’s Oil-for-Food Programme and tea exports to Iraq started increasing, touching 45 million kg (mkg) in 2012.
However, this golden period ended, thanks to the discontinuation of the programmme, and exports came down to ‘zero’. The industry started looking for other markets and identified a potential orthodox tea market in Iran.
The Trade Promotion Council of India led an F&B team to Iraq in 2018 and the Indian Tea Association (ITA) was a part of the team. The ITA met government officials, buyers, and chambers of commerce in Baghdad, Karbala, Najaf, Erbil and showcased Indian teas. And in 2021, Indian tea exports to Iraq touched 8 mkg. The industry and the Indian Embassy need to work in tandem and promote the commodity. This will help boost Indian tea’s share in the Iraq market.
The Iranian Government imposes restrictions on tea imports from time to time to encourage indigenous tea production. The Tea Board and the ITA started visiting Iran from 2012, and began showcasing a bouquet of Indian teas — their quality, shelf-life, price competitiveness, etc. The Indian Embassy there acted as a vital catalyst. Gradually Indian tea exports started increasing. In 2013, the ITA and the Tea Board conducted extensive one-on-one buyer-seller-meets. The ITA signed an MoU with the Iran Tea Association for 30 mkg of exports over the next three years. But sanctions began to impede exports.
However, both the governments devised a rupee-rial payment mechanism and tea was placed in the priority list. Both importers and exporters were happy with the smooth operation of the payment system; exports jumped from 14 mkg in 2012 to 25 mkg in 2013. Assam tea industry, which is famous worldwide for second flush orthodox and CTC, started making more orthodox tea to service the Iran market. A Joint Working Group (JWG) was formed to ensure smooth trading in tea. Export volume progressively increased, reaching 55 mkg in 2019. However, the exports declined thereafter due to payment issues since sanction on oil imports came in. Tea exports came down to 34 mkg in 2020 and 26 mkg in 2021. Covid was another reason for this export decline to Iran.
The RBI has allowed third-party currency payment system on a selective basis. The Tea Board needs to certify, and the Customs Department to accept, the third party. With the easing of the payment system and physical meetings with buyers once again, Indian tea export is bound to increase and regain its market share.
There was another blow from India’s largest tea market — that is, the erstwhile USSR. India used to export around 120 mkg of tea, peaking at 129 mkg in 1990. After the disintegration of the USSR, tea exports crashed to 46 mkg. Gradually, with the help of the Indian Embassy and participation at major fairs, tea exports to Russia did rise, though high inflation in Russia, economic upheavals, misuse of Indian tea in blends by Russian packeters, high import duty on packet tea, etc., acted as stumbling blocks. Both the governments devised a rupee-rouble payment mechanism in 1993. Though this helped tea exports to some extent, it was hit by a plethora of difficulties.
To complicate the situation, the Russia-Ukraine war has now come in the way of holding the level of tea exports to Russia/CIS. Shipping lines have suspended operations, ECGC has stopped risk cover, SWIFT is suspended, and shipment costs have gone up multiple times.
However, the exporting community is not deterred. The government needs to extend financial assistance to exporters to defray additional cost, extend more working capital, and convince shipping lines, ECGC, etc., for full support to exporters.
Counting on a strong friendly relationship with Russia, developing an active bilateral rupee-rouble payment mechanism would not be difficult. These will assist and encourage tea exporters to take risk and ship to Russia/CIS
Egypt and Pakistan used to be two major CTC markets for India. But after the formation of COMESA, Indian exports faced 30 per cent duty against Kenya’s zero duty, and India lost the market. After strenuous efforts, the market opened up for Indian tea, but more initiatives are needed to service this market.
Pakistan, the largest CTC tea importing country, engaged mainly with Kenya. In the 1990s, the ITA arranged various trade delegations.
However, after the Kargil conflict, trading was discontinued and Kenya captured 90 per cent of the Pakistan market. In future, if trading is allowed, concerted efforts are needed to regain this market.
Expand into more markets
Tea is such a beverage that those who consume it regularly will continue to do so whatever be the cost. Recent research has revealed the many health benefits of tea. Indian tea is available at various price points and is competitive vis-a-vis other exporting countries. So Russia/CIS, Iraq, Egypt or any other country would be able to buy. With active promotion exercise Indian Tea’s lost share can be regained. Industry, Tea Board and the government need to act fast.
Indian tea is heavily dependent on a few markets and is not diversified like its competitors Sri Lanka or Kenya.
Markets like Turkey, Poland, Syria, Libya, Chile, Australia, etc., should be explored while putting more emphasis on traditional markets like Russia, Iran, Iraq, Egypt, the UK, the EU, the UAE, China and Japan, among others. All these markets provide unique opportunities to various categories of Indian tea. India has more varieties of teas than what all other countries put together have.
With support from the respective Indian embassies and intensive liaison with the tea bodies in these countries, an additional 100 mkg of exports would not be impossible to achieve in the next 2-3 years.The Tea Board may need to devise promotion schemes and conduct roadshows in these countries. Social media, too, needs to be put to use for generic promotion of Indian tea. These initiatives will create more demand and India should be able to achieve 350 mkg of tea exports by 2025.
The writer is Secretary, Indian Tea Association