Why Indian tea exporters remain upbeat on Iran market despite disruptions

India’s tea exports to Iran have been attaining momentum due to the fact 2013. They broke all information in 2019 (January-December) to arrive at 53.forty five million kg (mkg), with Iran changing Russia as the greatest purchaser of Indian tea.

Can India repeat this accomplishment in 2020? It can, say tea sector sources, for legitimate reasons.

The obstacle, on the other hand, is imminent. Iran is devastated by the twin assault of the Covid-19 outbreak and a crude oil cost war, which restrictions consumption probable. Export activity has slowed down over the past two months. Quicker than afterwards, there could be a political upheaval in the Gulf nation, say experts.

Non-tea exports

But it is not just tea exports that are at stake for India. On the opposite, tea contributed a small over 4 for each cent to India’s $three.5-billion export monthly bill in FY19.

More than the past two fiscals, India’s exports to Iran have risen fifty two for each cent, using on the efficient implementation of a bilateral rupee-rial mechanism. It permitted receivables for exports to be adjusted towards the payables for India’s substantial crude imports ($13.5 billion in FY19)

India’s rice exports had been the major gainer of the payment mechanism, submitting sixty seven for each cent year-on-year growth to $one.six billion in FY19. This was adopted by soya oil cakes ($210 million), organic chemical compounds and electrical equipment, among other people.

Rice exports down

Considering that then, though, the story has improved.

India stopped oil imports from Iran due to the fact May well 2019 pursuing clean US sanctions. According to the Commerce Ministry, rice exports remained significantly lower in April-January 2019-twenty. On an annualised foundation, India’s complete exports to Iran are down 4.three for each cent this fiscal.

But tea is an exception to this craze. In FY19, India exported tea truly worth approximately $154 million to Iran. This fiscal, it attained $173 million in the very first 10 months. Sources say the figures are very likely to increase by the conclude of this month, as exports beneath the previous contracts are on.

Sujit Patra, Secretary of the Indian Tea Affiliation (ITA), is hopeful that India will conclude up exporting more teas to Iran in 2020. In the worst-case situation, assuming Tehran is rationing its complete imports, he expects tea to be the minimum influenced as it is detailed as an important merchandise in Iran.

No fluke

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

The assumption has advantage. Iranians involve an ample supply of excellent tea. The state consumes around eighty mkg of tea a year, of which 60-70 mkg is imported. The costlier orthodox variety is the most preferred, but they also eat some CTC (crush, tear, curl) tea.

Until 2012, Sri Lanka was the guide exporter of tea to Iran, with India’s share hovering all-around 14 mkg. This improved in 2013, with the Indian sector producing a strong pitch and exports to Iran reaching 23 mkg.

Considering that then India’s entire growth in complete tea exports has come from Iran. Aside from cornering the lion’s share of the orthodox market, India has also broken into Iran’s substantial-excellent CTC market, which was previously the sole preserve of Kenya.

Sustained work led to the creation of the great blend to go well with Iranian style buds and the market is now flooded with ‘Indian tea’ manufacturers. A parallel work at the again-conclude has found India’s orthodox creation boost a very clear 29 mkg over the past 7 decades.

The best aspect is Indian teas have also fetched much better value. The regular value Indian exports to Iran amplified 5 for each cent to $three.91 a kg in 2019.

Rupee-rial trade

But there is however a catch. The rupee-rial trade is important to exports to Iran. It is found to have supplied some cost benefit to Indian exporters in the past. Now that India has stopped importing oil, will the account remain operational? Banking sources say it will.

The Commerce Ministry does not publicly share any trade balance determine with Iran, and the balance in the rupee account is a intently guarded secret with the RBI. But banking sources say there is more than enough balance in the pool to guidance Indian exports to Iran.

The domestic tea sector ought to be banking on this mechanism for its Iranian export programs irrespective of the disruption prompted by the pandemic.