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The withdrawal of MFN status by India to Pakistan, following the recent terrorists attacks in Kashmir, is seen resulting in making dearer the daily use items such as tea and tomatoes in that country.
As exports of Indian teas slow down, Pakistan is seen relying more on imports of the beverage from Kenya. As a result, the prices of Kenyan tea have started moving up.
South Indian teas
“Pakistan imports around 65-70 million kg (mkg) of tea from Kenya annually and this is bound to increase. This was reflected in the price movement. Kenyan teas rose by ₹12-15 a kg today,” said Dipak Shah, Chairman of The South India Tea Exporters Association. Few contracts have been signed but none executed after the Pulwama attacks.
“Exporters have by and large refrained from executing the contracts. Nothing could be done about the goods in transit; exporters have since taken a cautious stand,” Shah said.
From India, Pakistan mainly imports the cheaper CTC teas such as Fannings and Pekoe Dust varieties. Teas shipped to Pakistan roughly account for nearly 6 per cent of the total tea exports from India which stood at around 249.11 mkg during the 2018 calendar year. Tea Board data show that shipments to Pakistan in 2018 stood at 15.83 mkg as compared to 14.73 mkg in the previous year. In value terms, tea shipments to Pakistan in 2018 stood at ₹154.71 crore (₹142.44 crore). The average realisation is close to ₹97.73 a kg.
“The prices of cheaper CTC are expected to move down, at least, for a temporary period,” said Sachin Dholakia, Director, Siewert & Dholakia Overseas Pvt Ltd, the Kochi-based tea exporter.
Also, the current situation may prompt the Indian tea producers to stop production of such cheaper teas. Exporters procure the tea from the Tea Serve auctions conducted in Coonoor by The Indcoserve (an association of Tamil Nadu Small Tea growers) for selling the produce at cheaper prices through cooperative societies. Most of the tea production which is being printed in this particular auction goes to Pakistan as it is one of the primary markets.
“If the producers improve the quality, this particular variety may find newer markets such as Russia, Egypt, Bangladesh, etc,” Dholakia said.
Expressing solidarity
Though it is still premature as production of tea is yet to commence in North India and the first flush will start arriving only around April-May, the Indian tea industry has extended solidarity and support to the government even if it comes at the cost of immediate impact on tea trade. Vivek Goenka, Chairman, Indian Tea Association (ITA), said if the government asks the industry to stop exporting (to Pakistan), it will fully comply and extend support to the government.
Analysts said some amount of tea to Pakistan may be re-routed through UAE or some such market as it may be difficult to immediately grab share in other markets. It is typically the lower end teas which are exported to Pakistan with an average price realisation of less than ₹100 a kg.
Anshuman Kanoria, Chairman, Indian Tea Exporters’ Association, said, “Each importer across the world is important to us, but in the current scenario we are firmly behind the government and our armed forces. At this juncture we are not thinking about potential impact on trade. We have to get rid of this menace once and for all and hopefully there will be a new dawn and even stronger trade, once peace is established.”
The Indian tea industry, Kanoria said, has been through several ups and downs in exports in the recent past. Iraq, for instance, used to buy “massive quantity” of tea from India. However, Indians lost that market post the war in Iraq and quantities dwindled. “But we survived… we find other markets in the interim and when situation improves we try to regain that market,” he said.
Exploring other markets
ITA is also exploring possibilities of enhancing exports in other alternative markets such as Egypt, Russia and CIS countries. ITA, which has been sending delegation to China, Russia and Iran last year, will continue to put efforts to ramp up exports and will further look to intensify it so as to ensure that the export volumes remain above 250 mkg, Goenka added.
According to Anil George, Vice President, Tea – Harrisons Malayalam Ltd, South Indian teas will be impacted on account of the export ban to Pakistan. This will be a big gain for Kenyan teas. HML is more into the Orthodox variety and the company does not have any exports to Pakistan.
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