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

Exports under pressure as major buyers battle Covid-19

Indian tea exports may fall 6-8 per cent this year owing to the Covid-19 pandemic, which has paralysed logistics movement, as well as pushed the global economy towards recession.

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

A 20 mkg shortfall at last year’s unit prices would translate into a trade deficit of over $64 million. Tea exports last year was already on the decline — at 248.29 mkg, as compared to 256.06 in 2018 because of various geopolitical factors in West Asia, Brexit, and other issues.

According to a Tea Board official, since major exporting destinations — the US, the UK, Japan, and Iran — are currently grappling with the pandemic and their economies are taking a hit, the demand for tea, which is a discretionary spend, may go down. Also, consumers can opt to downgrade their purchase, which will hurt Indian exports.

 

 

The blow comes just at a time when unit prices of Indian tea were on the rise for its better quality. The unit price in the UK improved from $2.96 a kg to $3.07 a kg in 2019, while in Iran, the largest destination for Indian tea exports, the price improved from $3.73 a kg to $3.91 a kg. In Ireland as well, the price soared from $6.62 a kg to $8.72 a kg last year.

“Iran is undergoing sanctions, and on top of this, there is the crude oil crisis. If the Iranian economy takes a hit, it will hurt Indian tea exports," an exporter from Kolkata said. As the pandemic struck India, the production of tea also suffered and this coincided with the first flush harvest.

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

“The entire production from Darjeeling is lost which is worrying," said Atul Asthana, managing director of Goodricke Group.

Prime boutique tea from Darjeeling, usually sold at exorbitant prices, is primarily shipped to Japan and Germany. Plantation companies said there have been some export enquiries from global buyers which is an encouraging sign. 

But then, samples cannot be sent as courier and shipping services have stopped and exporters are worried about the availability of containers to export destinations once the situation eases.

“One must consider that enquiries may be there but if tea is not available for supply, enquiries will also stop”, Asthana said.

Exporters, as well as the Tea Board, are pinning their hopes on Iran as it has the largest section of goodwill buyers. These are buyers who agree for a purchase based on word of mouth and not a legal contract, trusting the quality from various plantation companies.