Indian tea exports are headed for a crisis this year as the coronavirus outbreak is poised to shrink shipments in crucial export zones substantially.
The industry regulator, Tea Board of India has already signaled an alarm and has called for an exporters’ meet this week to deliberate on a solution to face the crisis.
“Looking at the trends arising out of the Coronavirus outbreak and other factors, we feel that the tea sector is headed for a huge crisis this year. Already, there is financial stress in the sector and it may deepen this year”, A K Ray, deputy chairman at the Tea Board told Business Standard.
The alarm follows after the deadly virus hit India’s key export market – Iran, and other major countries including Japan, cancelled the forthcoming tea exhibition.
Last year, Iran overtook Russia to become India’s largest tea export destination at 53.45 million kg (mkg) which signalled the revival of the pricier whole leaf tea exports. Against Russia, which is primarily a low priced crush, tear, curl (CTC) market, the entire export to Iran is whole leaf which is priced 80-150 per cent higher than usual CTC tea.
Exports to China – the epicentre of the coronavirus outbreak; have also been hit. Primarily a green tea market, China was also emerging a new destination for CTC teas from India. Last year, exports to China had risen by over 30 per cent at more than 13 mkg.
Japan, which is a major market for the pricey Darjeeling tea at 5 mkg, has also been affected by the virus and shipments to this country is expected to fall.
Usually February-April is a major season for the tea companies as forward contracts are signed during this period. Based on these contracts, where prices and the export volume are negotiated, tea companies plan the season’s harvest and chalk out their financial strategy and goals.
Industry officials noted that owing to the epidemic, contracts are not getting signed which left the Tea Board in a state of worry.
On the other hand, exports to West Asia, excluding Iran, has also registered a 41 per cent sharp fall at around 23 mkg due to the prevalent geo-political tensions. Exports to the UK has also been on a 25 per cent decline at around 12 mkg primarily due to Brexit.
To make matters worse, exports to Pakistan, formerly the fourth largest export market for India, has also hit rock bottom at just over six mkg due to India’s souring relations with its neighbour.
Ray said that while the export situation is expected to look gloomy this year, India is also burdened with over production and tea stocks may wreak havoc on tea prices this year.
“On one hand domestic consumption is stagnating and on the other hand production is increasing. Thus, there is a huge mismatch which is resulting in an imbalance in the trade”, Ray told this newspaper.
In 2019, domestic production increased by around four per cent at a record of 1,390 mkg while domestic consumption stagnated and export volume fell by around three per cent.
Amidst this situation, the banks have also been contracting their lines of credit to the tea firms thereby affecting cash flow direly for some of the major tea companies.
“We need to figure out how to face this looming crisis this year and work a way round. Some monetary help may be needed like one-time package for the tea companies”, Ray added.
The Tea Board has already approached the Centre seeking a relief package for the tea companies.
Exports in crucial Indian tea markets
Volume exported in CY 2018 (in mkg)
Volume exported in CY 2019 (in mkg)
UK
11.74
15.71
Iran
53.45
30.78
Russia
45.60
46.91
China
13.45
10.31
Japan
4.97
3.69
UAE
13.14
21.45
Source – Tea Board of India
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