Why Indian tea exporters remain upbeat on Iran market despite disruptions

India’s tea exports to Iran have been gaining momentum considering the fact that 2013. They broke all information in 2019 (January-December) to access fifty three.45 million kg (mkg), with Iran replacing Russia as the greatest customer of Indian tea.

Can India repeat this results in 2020? It can, say tea sector resources, for valid explanations.

The challenge, even so, is imminent. Iran is devastated by the dual attack of the Covid-19 outbreak and a crude oil value war, which limits intake opportunity. Export activity has slowed down over the earlier two months. Quicker than later, there could be a political upheaval in the Gulf nation, say specialists.

Non-tea exports

But it is not just tea exports that are at stake for India. On the opposite, tea contributed a very little over four per cent to India’s $3.5-billion export bill in FY19.

Above the earlier two fiscals, India’s exports to Iran have risen fifty two per cent, driving on the efficient implementation of a bilateral rupee-rial system. It permitted receivables for exports to be altered towards the payables for India’s massive crude imports ($thirteen.5 billion in FY19)

India’s rice exports were the most significant gainer of the payment system, publishing sixty seven per cent year-on-year expansion to $1.6 billion in FY19. This was adopted by soya oil cakes ($210 million), organic and natural chemical substances and electrical machinery, between other people.

Rice exports down

Since then, while, the story has modified.

India stopped oil imports from Iran considering the fact that May well 2019 subsequent fresh new US sanctions. In accordance to the Commerce Ministry, rice exports remained considerably lessen in April-January 2019-20. On an annualised basis, India’s total exports to Iran are down four.3 per cent this fiscal.

But tea is an exception to this pattern. In FY19, India exported tea worth virtually $154 million to Iran. This fiscal, it attained $173 million in the 1st ten months. Resources say the figures are probable to rise by the conclusion of this month, as exports less than the old contracts are on.

Sujit Patra, Secretary of the Indian Tea Affiliation (ITA), is hopeful that India will conclusion up exporting a lot more teas to Iran in 2020. In the worst-scenario state of affairs, assuming Tehran is rationing its total imports, he expects tea to be the least impacted as it is stated as an necessary item in Iran.

No fluke

The underlying assumption is India’s gains in the Iranian tea market place arrived out of difficult perform and not by fluke.

The assumption has merit. Iranians call for an ample provide of excellent tea. The place consumes around 80 mkg of tea a year, of which sixty-70 mkg is imported. The costlier orthodox assortment is the most chosen, but they also consume some CTC (crush, tear, curl) tea.

Until 2012, Sri Lanka was the direct exporter of tea to Iran, with India’s share hovering all over fourteen mkg. This modified in 2013, with the Indian sector creating a sturdy pitch and exports to Iran achieving 23 mkg.

Since then India’s entire expansion in total tea exports has appear from Iran. Apart from cornering the lion’s share of the orthodox market place, India has also broken into Iran’s high-excellent CTC market place, which was previously the sole preserve of Kenya.

Sustained effort and hard work led to the generation of the excellent blend to go well with Iranian style buds and the market place is now flooded with ‘Indian tea’ makes. A parallel effort and hard work at the back again-conclusion has noticed India’s orthodox production improve a distinct 29 mkg over the earlier 7 years.

The ideal aspect is Indian teas have also fetched better price. The ordinary price Indian exports to Iran elevated 5 per cent to $3.ninety one a kg in 2019.

Rupee-rial trade

But there is still a catch. The rupee-rial trade is important to exports to Iran. It is noticed to have provided some value advantage to Indian exporters in the earlier. Now that India has stopped importing oil, will the account continue to be operational? Banking resources say it will.

The Commerce Ministry does not publicly share any trade harmony figure with Iran, and the harmony in the rupee account is a closely guarded magic formula with the RBI. But banking resources say there is sufficient harmony in the pool to support Indian exports to Iran.

The domestic tea sector have to be banking on this system for its Iranian export plans inspite of the disruption brought on by the pandemic.