Foreign buyers asking for good quality tea at lower price

KOLKATA: Depreciating currencies in Russia and Europe have landed Indian tea planters in a major problem. Overseas buyers are asking for good quality tea at a much lower price.

This may hurt the profitability of tea companies as their cost of production has gone up.

Also, with a reduction in export incentive – to 3 per cent from 5 per cent – in the new foreign trade policy, Indian tea has become less competitive internationally.

India’s tea exports of 180.05 million kg during the April-February period of fiscal 2015 showed a 25.07 million kg decline over the corresponding period of FY14, Tea Board data showed.
This decline has largely been in the wake of increased competition from Kenya, which had offered teas in the global market at a lower price than India.

"Russia and Iran are the two major markets for Indian tea. Rouble depreciation is hurting Indian tea exports as the buyers there are not ready to pay up more," said Sujit Patra, additional secretary of the Indian Tea Association.

"We are trying to sort out the issue with Russia. Meanwhile, we are keeping a close watch on the rupee-rouble trade contours." Russia lifted 34.75 million kg of tea between April ‘14 and February ‘15 as against 35.46 million kg a year earlier. While volumes had fallen marginally, prices too were lower. Russia offered $2.76 (Rs 173) per kg in fiscal 2014, but in fiscal 2015, it bought tea at $2.44 per kg.

"Not only the rouble depreciation, the exporters are facing problems over the euro depreciation too. We are concerned whether some unscrupulous exporters take this chance and send low-quality teas to these countries taking advantage of the global economic scenario. That will tarnish the image of Indian tea in the world market," said Anshuman Kanoria, a leading tea exporter.

ITA’s Patra said efforts were being taken to develop trade ties with Iraq and Libya. "While we are in constant dialogue with Iran so that our exports of orthodox teas increase to this Islamic nation, we are also considering building trade ties with Iraq and Libya. We are also giving an emphasis on the Kazakhstan market. This will help us in reducing dependence on a single nation for exports," he said.

Exporters say developing new markets would not be an easy task. "Though these countries are strategically located and are definitely important destinations for Indian tea exports, the banking system in these countries should develop more to handle exports," Kanoria added.