South Indian tea exporters gear up to tap overseas mkts

Indian exporters to cash in on the dip in production of Kenyan tea

The severe drought in Kenya may have hit the tea industry globally, but it has proved a blessing for the South Indian tea market, which has set its eyes on the unexplored overseas markets.

Kenya, the world's largest tea exporter, has been hit by what has been described as one of the worst droughts in the decade. Sources said that insufficient rains between October and December 2005 had begun to affect the country's tea output since January 2006.

As a result, Egypt and Pakistan, two of the major markets for Kenyan tea, are turning to Indian exporters, raising India's hopes of a brighter export scenario in 2006. Between January and December 2005, Indian tea exports were 187.5 million kg, as against 197.6 million kg in 2004, according to the data available from the Tea Board.

In 2005, Kenya exported almost its entire production of 349 million kg tea. This year, a crop loss of about ten per cent is estimated in the country.

Basudeb Banerjee, chairman, Tea Board, said that Kenya reported a 16 million kg (mkg) drop in its production in January 2006. The shortfall is projected at an approximate 50 mkg, he added.

Elaborating on the enquiries from Egypt, some of the tea exporters told Business Standard that the African country sourced nearly 90 per cent of its 100 mkg annual imports from Kenya, its neighbouring country. Moreover, a duty of 30 per cent on Indian tea imposed till recently by the Egyptian government, had made Indian teas expensive. As a result, Indian exporters could not make an impact in the market.

Recently, this rate has been brought down to five per cent. Industry circles feel that this aspect, along with the developments in Kenya, could become advantageous for Indian tea exporters, especially as Egyptians mostly drink CTC tea.

It is noteworthy that only Indian teas match the Kenyan quality. However exporters feel that the industry may take some time to work out the blends they prefer.

About 65 per cent of the 130-mkg market for tea in Pakistan was also serviced by Kenya. However, India's exports to Pakistan had already started picking up following concerted efforts by the industry. Indian tea exports to Pakistan increased to 9.5 m kg in 2005, from a mere 3.5 m kg during the previous year.

More than six consecutive auctions at the two centres in the region - Coimbatore and Coonoor - had witnessed entry of exporters in a big way. The support comes from the buyers even as the production has been affected by the frost in South India. The Pakistan and Kenyan buyers have so far kept the market and auctions lively with quoting higher prices.

Apart from Egypt and Pakistan, China - India's arch rival in the global tea market, has also come calling, tea industry sources told Business Standard.

Recently, a delegation from China had come to India looking for black tea. Although 90 per cent of the Chinese production is green tea, the youth in the country prefers black tea and an initial demand of about 2.5 m kg for black tea is being projected, sources said.

Buoyed by firm prices and generation of more export enquiries from overseas markets, the industry is now working on developing the perfect blends preferred by the markets in each country and offering them with value-addition processes like packaging, marketing, and promoting tea as a healthy drink.

Moreover, with the winter getting over, making the waterways clearer, the better movement of goods to Russia also seems to cheer the Indian tea industry.