Lanka crisis brews cheers for Indian tea exporters

Even as the Russia-Ukraine armed conflict continues, Russia, India's time-tested ally, has significantly increased purchase of Indian tea. And it's not just Russia alone, but at least two other countries- Iran and Turkey have started buying larger quantities of tea from India, bringing some cheers to Indian tea exporters. That's not all. Russia, for one, is now paying higher values and paying more for the Indian beverage. Russia, incidentally, is one of the biggest markets for Indian tea. Going by Indian Tea Association estimates, as much as 18 per cent of India's tea exports travel to Russia. According to a survey by the India Brand Equity Foundation, Russia brought in 32.5 million kg of tea from India in 2021–2022.

With the demand from Russia heading northward, the price of orthodox tea (orthodox tea is loose-leaf tea made with the age-old techniques of plucking, withering, rolling, and drying. It is renowned for having a flavour that is more complex, vibrant, and brisk) or loose leaf tea produced in the traditional manner, has increased by as much as 50 per cent. Since Russia also uses this type of tea, it is said that costs for high-quality CTC tea have increased by as much as 40 per cent.

Quite significantly, ever since the break-out of the Russia-Ukraine war in February, this year, the sale of Indian tea in Russia got severely affected. The same happened with exports to Iran, albeit for a different reason. Iran, another significant market for Indian tea exports, was having payment problems. Indian tea seems to have overcome both the problems and shipments to both the countries are now showing signs of a significant rise. The current Sri Lankan economic situation has also come in handy for Indian tea exporters as it is likely to lead to a significant decline in tea production and shipments on the island for the season 2021-2022. Going by Tea Board of India figures, before the current crisis, Sri Lanka had exported tea worth $1.3 billion, out of which it had exported tea worth $167 million to Turkey, $132 million to Russia, $75 million to Iran, $104 million to Iraq, and $55 million to China. This has now dropped to its lowest level in 23 years.

Mind you that Sri Lanka produces almost 400 million kg of tea annually- which is mostly exported to CIS countries (mainly Russia), Iran, UAE, and Turkey, which are the key markets for Sri Lanka, and hence makes it largest orthodox tea producer in the world. But the downfall is an opportunity as the tea consumers from around the globe including Sri Lanka will now depend on Indian Tea.

As a starter, rising tea prices in North India coupled with the continuing uncertainty in Sri Lanka has already prompted overseas buyers, especially from Iran, to source more quantities from Kochi auctions.

Flavors like Assam, Darjeeling, and Nilgiri are among the finest teas in the world. And during the FY21, Indian Tea worth $704.36 million was exported from the country. If Indian tea can cash in on the current situation and increase its footprint in the global market-that remains to be seen.