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October 3, 2000
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Dropping tea exports to Russia ring alarm bells

Neena Haridas in New Delhi

The Samovar, an urn traditionally used to brew tea in Russia, often saw the good old Indian tea leaves. However, Russians have begun to take a fancy to tea from Sri Lanka and China.

Of late, India (which ranked among the top five tea exporters in the world) has been losing ground in the global markets, creating a flutter in the Indian tea industry.

According to Ascon Industry Monitor figures, Indian tea exports grew at a low rate of 2.7 per cent in April-June 2000 over the corresponding period in 1999.

The fall in exports growth directly reflects on exports to Russia, as it is the largest importer of India tea in the world. In 1998, Russia imported 210.34 million kg of Indian tea. This figure fell by 20.16 million kg to 190.18 million kg in the calendar 1999.

The average customs value of all teas exported to Russia fell to $1.78 per kilo in January to September 1999 from $2.16 in the same period in 1998.

This hit the bottomlines of the tea exporting community in India because Russia accounts for more than 50 per cent of total tea exports from the country.

Consider this: Britain, which is the second largest buyer of Indian tea, imports only 25 million kg to 30 million kg per year.

M Parmananthan, head of the statistical department of Tea Board points out: "Russia becomes crucial to the Indian tea industry because of the sheer quantity involved. A fall in exports to this market has snowballing effect on the entire Indian economy."

Realising this disturbing trend, the Tea Board is working on strategies to increase tea exports to Russia. Says Parmananthan: "As quality is becoming the deciding factor, India will have to produce quality teas if it wants to continue its hold in the international market."

This year, India plans to export 100 million kg to Russia, and this would be a two-thirds of Russia's total annual demand of 150 million kg.

The business delegation from the Confederation of Indian Industry that visited Russia prior to President Vladimir Putin's India visit, emphasised on increasing tea exports to Russia.

Says CII director-general Tarun Das: "We are glad that Putin intends to broaden trade relations between Indian and Russia. While it is good to look at electronics and energy as new potential areas, it would be foolish to ignore tea - which has been the mainstay of our exports to Russia."

Vladimir Rov, spokesperson, Trade Representation of Russian Federation in India, says, "We expect India to remain by far the dominant player in Russian market as far tea imports are concerned. Now that we are getting over the economic crisis, Russian traders should be able buy more from India."

The optimistic approach also stems from the fact that India's tea export during the first six months of 2000 registered a marginal increase of 5.01 million kg (mkg) despite a severe decline in the first quarter.

In fact, the Indian Tea Association has projected tea exports worth 225 million kg (mkg), most of which is the orthodox tea consumed by Russia.

Says T S Sarkar, member Indian Tea Association, "We have been having detailed dialogues with our counterpart in Russia on plans to increase exports."

The Russian markets have been very active till 1998, and the downslide began in 1999. The fall is being attributed to availability of cheaper tea from Sri Lanka and the rouble devaluation. Economists feel that the rupee/rouble agreement between the two countries is not very favourable for the Russian buyers who are looking at other markets to buy from.

Says a member of the Darjeeling Plantation Association in Calcutta, "The most attractive part of buying Indian tea is its low cost. If the commodity is available at a cheaper price elsewhere, the Indian exporters are likely to lose out."

So what really is scaring away the Russian buyer? There are two schools of thoughts here: One says, it is the price. Another says, it is the quality.

In a way it is both. Earlier when the Russian economy collapsed, the buyers turned away from the Indian markets in search of cheaper products. In the meanwhile, Sri Lanka gained ground in the global tea market and the Russians began taking notice of them and changed their loyalties.

What has really gone against India is the Russian choice. Russian buyers prefer the medium teas, as against the Japanese and Europeans who buy high grown leaf tea. Now in India, the medium variety preferred by Russian comes from South India which is of very poor quality.

"Hence, intrinsically, we are selling poor quality tea and this is proving to be a real hurdle in increasing exports," says a member of the Tea Traders' Association.

However, Putin's visit and the implementation of the North-South transport corridor linking India and Russia are expected to increase tea trade between the two countries.


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