With Russia stepping up purchase of Indian tea in the past few weeks, plantation owners, especially those in Assam and Nilgiris, are poised to reap a windfall. The latest auctions have fetched them higher prices for the tea manufactured in the traditional way. Russia is even paying a premium for the brew.
But buyers are insisting on trade settlements in rupee or ruble terms, rather than in the US dollar, a trend which has somewhat deprived exporters of the benefit of the falling rupee.
Nayantara Pal Choudhuri, president, Indian Tea Association ( ITA) told FE there are definitely increased enquirers from Russia but how much it has turned to real consignments is difficult to say at this point of time.
According to Tea Board data, Russia’s tea imports from India in April this year was 3 million kgs compared to 2.54 million kgs during the year ago period. But value realised during April this year was much lower at Rs 144.27 a kg against Rs 187. 46 a kg during April last year.
The situation has become much better since. According to exporters like Golden Tips, there has been a steep hike, as much as 75%, in the prices of tea manufactured in the traditional way. ” We have been adversely affected by this steep increase as we have to buy tea from tne plantation owners at a much higher price. Escalating shipping costs have further squeezed our operating profit margins. As a silver lining, the Rupee has been spiralling down south, which has partly offset our losses and stabilized the market,” Madhav Sarda, managing director, Golden Tips Tea, said.
According to industry sources Russia, which imports both Orthodox and CTC, at present giving a premium to the Indian variety, has escalated tea prices at the planters end by around 50% for Orthodox and 40% for CTC. But many exporters, who have been exporting to Russia, are of the view that sending consignments to Russia won’t be beneficial since Ukraine and Russia was an integrated market for tea and the war has fragmented it. Further exporting in Rupee or Ruble terms keeps a small margin against high risk that has to be taken and the continious increase in freight charges may finally incur losses. But certainly there are increased demand of Tea from Russia partly for lack of exports from Sri Lanka, and this has fetched some benefits to the Indian Tea planters.
India exports around 230 million kgs of tea annually, out of which about 16% is shipped to countries like Russia, Iran, US, UK, Germany, Japan and CIS countries. Russia imported 32.5 million kg of tea from India in FY 22 but when the Russia -Ukraine war started in February this year, it had plunged Indian tea exports to the region into disarray. Port operations got disrupted and payment were delayed impacting the whole supply chain. In fact, major shipping companies like Maersk and MSC (Mediterranean Shipping Company) had suspended operations to Russia which had compelled tea exporters from India to stop sending consignments to the region. However, the major ports in Russia, Novorossiysk, St. Petersburg and Vladivostok, are now fully operational and Indian tea exporters have started parking their produce in these ports. Earlier the Odesa, the largest Ukranian sea port, used to be the destination for sending consignments to both Russia and Ukraine.
But trade settlement in Rupee terms won’t be lucrative, for which exporters are looking for opportunities in other markets. According Russia Briefing (a daily news service about business) RBI has allowed doing trade settlements in Rupee terms but Russia is insisting in terms of ruble.