Indian tea exports may decline by up to 8% over Covid-19 outbreak

Indian tea exports may fall by 6-8 per cent this year owing to the global outbreak of Covid-19, which has paralysed logistics and pushed the global economy towards recession.

Estimates from the Tea Board suggested that owing to the loss of the first flush and the complete wipe out of Darjeeling tea from the system, there could be a shortfall of 16-20 million kg (mkg) this year in export volume. Moreover, if the production and quality in the second flush starting May is affected, then the export shortfall may increase.

A 20 mkg shortfall at last year’s unit prices would translate into a trade deficit of more than $64 million.

Tea exports were already on a decline last year, at 248.29 mkg as compared to 256.06 mkg in 2018, owing to geo-political factors in West Asia, Brexit in UK and other factors.

According to a Tea Board official, since major exporting destinations such as the US, UK, Japan and Iran are currently grappling with the Covid-19 situation and their economies are taking a hit, the demand for tea may go down, as it is a discretionary spend. Besides, consumers can opt to downgrade their purchases as well, which will hurt exports from India.

The blow comes just at a time when unit prices of Indian teas were on the rise as quality had improved.

Prices in the UK improved from $2.96 to $3.07 per kg in 2019 while in Iran, the largest destination for Indian tea exports, they rose from $3.73 to $3.91 per kg.

In Ireland as well, prices soared from $6.62 per kg to $8.72 per kg last year.

“Iran is undergoing sanctions and on top of that, there is the crude oil crisis. If the Iranian economy takes a hit, it will hurt tea exports as well,” an exporter from Kolkata said.

Tea production in India took a particularly bad hit as the impact of the pandemic coincided with the first flush harvest.

Estimates suggested that nearly 90 per cent of the produce from Dooars in West Bengal has gone to waste due to the lockdown, while in Darjeeling 0.8 mkg of prime tea – incidentally one of the costliest varieties – has been lost.

“The entire production from Darjeeling is lost, which is worrying,” said Atul Asthana, managing director at the Goodricke Group.

Prime boutique tea from Darjeeling, which usually commands hefty prices, is primarily shipped to Japan and Germany.

However, plantation companies said there have been some export enquiries from global buyers, which is encouraging. But then, samples can't be sent as courier and shipping services have stopped and exporters are worried about availability of containers once the situation eases.

“One needs to consider the fact that enquiries may be there, but if tea is not available for supplying, the enquiries will also stop,” Asthana said.

Both exporters and the Tea Board, however, are pinning hopes on Iran as it has the largest section of goodwill buyers. These are the kind who agree to purchase based on word of mouth and not legal contracts, as they trust the quality from various plantation companies.

2019 2018 2017

Volume imported (in mkg) 248.29 256.06 251.91

Value added (in $ million) 796.36 780.34 766.06