Iran trade sanctions worry India's tea exporters

The increasing pressure of sanctions by Western countries on trade with Iran is worrying Indian tea exporters

For, Iran is a major consumer of India’s orthodox quality tea. It directly imports about 15 million kg every year from India, while another 50 million kg is exported through other routes, such as Dubai, industry insiders say. This is a high proportion of India’s total tea exports in 2011, which was 187 million kg.

India produced 988 million kg in 2011, of which about 80 million kg was orthodox tea, considered a more complex variety than the CTC tea. “The current situation in Iran is a major concern for exporters and producers. A decline in exports to Iran may prompt curtailing of orthodox tea production by 15-20 per cent and increase that of CTC,” said Arun Singh, vice-chairman, Indian Tea Association (ITA), on the sidelines of an industry roadshow here on Thursday. “Such a situation would affect both the sides: We would lose precious foreign exchange earned from export of orthodox tea. And, with increased supply of CTC (largely consumed domestically), prices in the domestic market would start falling,” he added.

In recent days, issues relating to payments from Iran have also cropped up. Earlier, the Reserve Bank of India (RBI) had scrapped the Asian Clearing Union currency swap system for these payments. In December last year, the American government had announced sanctions on all financial institutions dealing with Iran’s central bank. “Many Indian tea exporters haven’t received money, due to the lack of clarity on policy as well as on political developments in Iran. In the current situation, the industry requests the government not to follow the US-imposed sanctions on Iran, but to follow the trade protocol set by the United Nations,” said Singh, who is also the managing director of Goodricke Group Ltd, a leading tea producer.

Meanwhile, sector experts also hinted at Pakistan emerging as an important destination for exports. “Pakistan’s annual tea requirement is 228 million kg. In 2011, India exported about 24 million kg, more than India’s targeted 20 million kg. We see further growth in exports to Pakistan, but we need to be given most-favoured nation status (meaning no discriminatory tariffs),” said Azam Monem, chairman of the export promotion & marketing sub-committee of ITA.

He said Pakistan imposes 35 per cent duty on goods imported from India. “Imports from Bangladesh attract only seven per cent duty. We need such rates to increase the exports to Pakistan,” said Monem, director at McLeod Russel India.

India’s yearly per capita consumption of tea is 700 million kg, much less than Pakistan.