Indian firms may help Iran modernise its tea industry

As the commerce ministry is pursuing discussions with its Iranian counterpart to revive the latter's tea industry, which saw a major decline in the recent past, it may open up a plethora of opportunities for the Indian tea companies to seek joint ventures in Iran.

In a Joint Working Group meeting between Iranian and Indian ministers and officials, Iran has approached India to modernise its tea industry in Lahijan, the area bordering the Caspain Sea. The task, which is still in a discussion stage, will fall on the shoulders of the Tea Board of India.

"We have asked them about the machines which they already have as the plan involves modernisation of the plantations as well," Santosh Sarangi, chairman, Tea Board of India said.

It is proposed that the Tea Board of India would also help with training of Iranian personnel in Tea Research Association, United Planters' Association of Southern India and other Indian institutions.

This development may open a lucrative opportunity for the large Indian tea producers. The Indian Tea Association (ITA) has asked for a paper from the Iranian commerce department as well as the Tea Board of India, exploring the possibilities of joint ventures for Indian tea firms.

"There is a possibility for Indian companies to opt for joint ventures in Iran. We cannot simply modernise the plantations and then move out," said Azam Monem, vice-chairman of ITA.

Asked if boosting Iran's local industry will hurt Indian exports, Monem said, "All these years, tea sellers in Iran have been blending Indian tea with their local produce and Iranians are now used to this taste. There cannot be a sudden disruption."

The ITA opined that Iran - traditionally an orthodox tea market consuming the best tea variants - presents a ready market for Indian tea producers. While the orthodox specialist companies will just need to set-up an establishment there, the CTC tea producers can find a ready-to-serve consumer market.

The Iranian tea market is pegged at nearly 120 million kg (mkg) annually of which 20 mkg is ingenuously produced while Sri Lankan imports account for 30-40 mkg. Tea from India comprises just over 20 mkg while the Kenyan tea (mostly CTC) takes up about another five per cent of the market. However, owing the porous border, around 20 per cent of the tea trade is illicit and unaccounted for.

Historically, Iran owes both the plantations as well as the skill of cultivation to India. In 1899, Mohammad Mirza, who used to work in the Iranian Consulate in the British-ruled Mumbai, first sent Indian tea from the Kangra valley to Lahijan in Iran after clandestinely learning how to produce tea from Indian plantations. Earlier, a failed attempt to produce tea from Indian seeds was made in 1882.

While production boomed in the region touching highs of 50-60 mkg, it has now fallen to about 20-22 mkg, making Iran import-dependent. Around 24,000 hectares of land is presently under tea cultivation in Iran.

During FY16, India exported 20.41 mkg of tea valued at $79.68 million, compared with export of 18.14 mkg of tea valued at $78.29 million in FY15. However, unit prices of the brew fell by 9.7 per cent at $3.90 a kilo in FY16.

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Areas of possible cooperation between India and Iran

• Tea production and development
   
• Marketing of tea
   
• Modernisation of estate and other leaf processing factories
   
• Improve output per hectare by improving cultivation methods
   
• Indian investment in Iran in JV companies to manufacture, market and sell tea