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| Tea prices have come down during May-June on a sale-to-sale basis as compared to prices during the same period, last year.
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| The price movement is contrary to that during January-April when prices were actually up from last year.
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| Industry sources said, the drop in prices was largely due to the increase in production and absence of alternative export markets.
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| While production was up by 36 million kg upto end of May, exports were down by 21 million kg during the same period.
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| According to senior representatives in the industry, the situation continued to be bleak. There has been no breakthrough in the Iraq impasse with the food-for-oil programme scheduled to lapse by September.
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| Moreover, most of the corporates were still struggling to confirm letters of credit for Iraq exports for which orders had already been placed.
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| The Iraq uncertainty has had a tremendous adverse impact on Indian exports since last year, the country picked up around 40 million kg, which was very close to what the Russian market imported and Russia has been traditionally considered to be the most important market for Russia.
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| However, the Indian tea industry was looking for alternative markets. Pakistan Tea Association has already agreed to import 10 million kg.
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| The other potential market, which was being tapped was Egypt. Egypt was a 10-15 million kg CTC market and depended 100 per cent on imports, which implied an opportunity for Indian exports.
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| Egypt mainly imported from Kenya due to the preferential duty of as low as 3 per cent under the COMESA agreement. In comparison, Indian tea would have to bear a duty burden of 30 per cent which made Indian tea exports uncompetitive.
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| But, sources said there was some bilateral talks between the two countries and tea was one of the items being discussed. In fact, a delegation of experts from Egypt to India or vice versa was being planned.
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| The contours of the discussion hovered around valuation of tea which was determined at a fixed rate. So, when prices came down the Indian tea was at a disadvantage.
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| Discussions were on with the Egyptian customs authority to rectify the anomaly. Also, improvement in the flow of information between the two countries were also being discussed. |
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