Why Indian tea exporters remain upbeat on Iran market despite disruptions

India’s tea exports to Iran have been gaining momentum since 2013. They broke all data in 2019 (January-December) to attain 53.45 million kg (mkg), with Iran changing Russia as the biggest consumer of Indian tea.

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

The problem, even so, is imminent. Iran is devastated by the dual assault of the Covid-19 outbreak and a crude oil cost war, which restrictions intake likely. Export exercise has slowed down around the past two months. Faster than later, there could be a political upheaval in the Gulf country, say industry experts.

Non-tea exports

But it is not just tea exports that are at stake for India. On the contrary, tea contributed a very little around four for every cent to India’s $three.five-billion export monthly bill in FY19.

More than the past two fiscals, India’s exports to Iran have risen fifty two for every cent, riding on the successful implementation of a bilateral rupee-rial mechanism. It permitted receivables for exports to be adjusted against the payables for India’s big crude imports ($13.five billion in FY19)

India’s rice exports were being the most significant gainer of the payment mechanism, publishing sixty seven for every cent calendar year-on-calendar year progress to $1.six billion in FY19. This was adopted by soya oil cakes ($210 million), natural and organic substances and electric powered equipment, among others.

Rice exports down

Due to the fact then, although, the tale has altered.

India stopped oil imports from Iran since Could 2019 next refreshing US sanctions. In accordance to the Commerce Ministry, rice exports remained substantially reduce in April-January 2019-twenty. On an annualised basis, India’s total exports to Iran are down four.three for every cent this fiscal.

But tea is an exception to this trend. In FY19, India exported tea well worth virtually $154 million to Iran. This fiscal, it reached $173 million in the initial ten months. Sources say the figures are probably to rise by the finish of this thirty day period, as exports underneath the previous contracts are on.

Sujit Patra, Secretary of the Indian Tea Association (ITA), is hopeful that India will finish up exporting far more teas to Iran in 2020. In the worst-circumstance situation, assuming Tehran is rationing its total imports, he expects tea to be the least afflicted as it is outlined as an vital product in Iran.

No fluke

The underlying assumption is India’s gains in the Iranian tea market came out of tricky function and not by fluke.

The assumption has advantage. Iranians involve an abundant source of top quality tea. The country consumes roughly eighty mkg of tea a calendar year, of which sixty-70 mkg is imported. The costlier orthodox assortment is the most chosen, but they also eat some CTC (crush, tear, curl) tea.

Until 2012, Sri Lanka was the lead exporter of tea to Iran, with India’s share hovering around fourteen mkg. This altered in 2013, with the Indian market building a robust pitch and exports to Iran achieving 23 mkg.

Due to the fact then India’s entire progress in total tea exports has appear from Iran. Aside from cornering the lion’s share of the orthodox market, India has also broken into Iran’s substantial-top quality CTC market, which was previously the sole maintain of Kenya.

Sustained exertion led to the development of the ideal blend to go well with Iranian flavor buds and the market is now flooded with ‘Indian tea’ manufacturers. A parallel exertion at the back-finish has found India’s orthodox generation maximize a distinct 29 mkg around the past seven several years.

The ideal portion is Indian teas have also fetched better benefit. The average benefit Indian exports to Iran elevated five for every cent to $three.ninety one a kg in 2019.

Rupee-rial trade

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

The Commerce Ministry does not publicly share any trade equilibrium determine with Iran, and the equilibrium in the rupee account is a carefully guarded top secret with the RBI. But banking resources say there is more than enough equilibrium in the pool to assist Indian exports to Iran.

The domestic tea market must be banking on this mechanism for its Iranian export ideas inspite of the disruption triggered by the pandemic.