India's tea exports to Russia face shipping snags, payment delays

Uncertainty looms large over one of India's largest tea markets; exporters scramble to get state help.

Russia needs tea and it may still be finding ways of doing business with India, but last-mile delivery and delay in payments have emerged as challenges for the commodity’s producers and exporters.

From delays in shipments to containers being offloaded at different transshipment ports and payment issues, uncertainty is looming large over one of India’s largest markets for tea.

“Wherever vessels could find a route, shipments were offloaded,” said Dipak Shah, chairman of South India Tea Exporters Association.

“The situation is very difficult. There are no payments coming in and shipments are getting offloaded at European ports,” said Binod Bansal, Export Director, New Tea Co. Five of Bansal’s containers were offloaded: three in Kolkata, and the other two are likely to be in some European port.

Shipments in transit were now one of the major challenges said, sources in the Tea Board. “Due to the transport embargo on shipments into Russia and Ukraine, many of the shipping lines are not taking the shipments to their destination. So they are stuck in most of the transshipment points,” sources said.

Some shipments are reaching, albeit slowly. Himanshu Shah, chairman, M K Shah Exports, said, “Our buyers have confirmed the arrival of containers at Russian ports. Whatever containers were in transit, are reaching the Russian ports gradually.”

M K Shah Exports is one of India’s largest orthodox tea manufacturing and export companies. The company exports about one per cent of its production to Russia directly.

Disruption in shipping means delayed delivery to the end buyer, which in turn further defers payment for the cargo. Shipping lines are offloading the cargo in ports like Rotterdam or Hamburg without any clear timeline for the onward journey to Russia due to the war.

On the payment side, while most of the issues are getting resolved, hold-ups have become normal. Exports to Russia are based on dollar or rupee payments.

The Tea Board, which is collecting information from exporters and taking it up with the ministry of commerce, said that the Directorate General of Foreign Trade (DGFT) had resolved most of the pending payment issues. “Almost everything has been remitted but there might still be a few outstanding issues,” they said.

The experience is varied for exporters. But payments for dollar and rupee trade have been received.

Himanshu Shah said that he had received payment on March 31 and buyers were still paying for the goods in US dollars as contracted.

Anish Bhansali of Bhansali & Co said, he continues to get dollar and rupee payments but slowly. Bhansali exports about 6,000 tonnes of tea to Russia a year.

Tea in Russia is not under sanctions and not all Russian banks are under sanctions. Hence, the business hasn’t come to a standstill. But from hereon, the journey could be a struggle even though there are inquiries from Russia. A solution needs to be thrashed out sooner than later before volumes of North India - the new season teas have just come in - pick up.

Importance of Russia

Russia is among the top two buyers of Indian tea. Between April – March 2021, of total industry exports of 202 million kg, Russia accounted for 35.61 million kg; the entire CIS was at 49.09 million kg.

The industry believes that it’s impossible to make up for the deficit in Russia and without a solution, the domestic market may get impacted. “The reason why we are not feeling the crunch is because there is not much new season tea available. But if volumes come in and it continues this way, prices will drop,” said Bhansali.

Azam Monem, director, McLeod Russel India, said, the domestic demand is expected to remain high in the next 2-3 months because of a negligible carryover and the impact of fall in exports to Russia will not be felt immediately. “Exports start from the end of June and by then a solution will have to be found. There is uncertainty beyond June,” he said.

The Tea Board is working on it. Sources said that talks with big retail chains in Russia were being held. “Some of the biggest retail chains have said that if we find Indian teas according to our taste, we will find a way to get them in. But we are also looking at every alternative avenue,” they said.