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Despite US sanctions, Indian tea cos bullish about boosting trade with Iran

In 2018, tea exports to Iran, India's second-most important tea market, shot up only by around 3.5% in terms of volume

Avishek Rakshit  |  Kolkata 

Tea, tea garden

are bullish about increasing trade with Iran after Uco Bank clarified to tea companies that the with its West Asian neighbour will continue, while exporters expect the Iranian to grow by over 15-20 per cent this year.

In 2018, to Iran, India’s second-most important tea market, shot up only by around 3.5 per cent in terms of volume. However, Indian producers and suppliers argued that the low growth was due to a lack of clarity on whether the would continue in the face of on this major oil-producing country and if at all payments would come on time as Iran is likely to face a shortage of US dollars in its exchequer.

“However, it is clear now and Uco Bank is handling the payments. Iran as a market, is also expected to grow by 15-20 per cent this year”, Vivek Goenka, chairman at the (ITA), said.

The ITA, as well as, exporters to Iran reasoned that during 2016 and 2017, when the threat of was not looming on Iran, India had a stabilised tea trading environment with this country, surged by over 74 per cent at 29.57 million kg (mkg).

Data from the Tea Board of India also highlights that after India got an exemption from US to trade with Iran, exports to this country increased by over 109 per cent at 5.9 mkg in January this year.

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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 per cent of India’s purchases of Iranian oil could be paid back in rupees covering tea, rice, medicines and commodities not sanctioned by the UN.

Although the $10.6 billion worth of trade between India and Iran majorly comprises oil imports from Iran, accounting for $8 billion, 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 per cent this year.

Tea Board 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 per cent at Rs. 263.20 leading to forex earning of Rs. 155.29 crore in January alone from the tea trade with Iran.

“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 owned Goodricke Group, said.

Moreover, according to Asthana, will also help India further its direct exports to Iran and replace Ceylonese tea from Sri Lanka.

In the prime orthodox (handmade tea in the traditional method), Ceylonese tea primarily competes with Indian tea.

While India enjoys favourable trade terms with Iran, this West Asian country pays Sri Lanka in dollars which are now scarce in Iran.

Indian tea is also routed to Iran via Russia and UAE. Some of the Indian exporters bill the tea to a merchant buyer in these countries, who thereafter ships it to Iran. At times, this produce is also billed to a foreign subsidiary of an Iranian tea buyer.

In November last year, several major tea companies in India had curbed production of orthodox teas over uncertainty in trade with Iran.

  • Iran is India’s oldest trading partner with trade dating back to 3rd century BC
  • Direct to Iran account for $ 114.26 million accounting for over 15% of total tea exports
  • Indirect exports to Iran estimated at $ 100 million accounting for over 13% of total tea exports
  • Average price per kilo of Iranian exports account for $ 3.73 making it the most lucrative market for exporters after Russia It's a serious responsibility, will do my best: Sriram Panchu on Ayodhya meditation

First Published: Fri, March 08 2019. 17:11 IST
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