Tea imports from Nepal hurting Indian tea industry

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October 20, 2021 3:15 AM

A large quantity of duty-free tea imports, meant for re-export comes to India at a very low price from origins such as Africa, Argentina, Vietnam and Nepal.

"Notwithstanding the likely moderation in financial performance of key bulk tea producers in FY22, it would still be substantially better than what they posted in FY20."Notwithstanding the likely moderation in financial performance of key bulk tea producers in FY22, it would still be substantially better than what they posted in FY20.

Duty-free imports of Nepal tea, meant for re-exports, is hurting the Indian tea industry’s interest since a bulk of the imports happening remains in the domestic market disturbing the demand-supply equilibrium. Azam Monem, director, McLeod Russels, told FE there is an influx of average quality Nepal Tea into the Indian market, all of which are not re-exported.

A large quantity of duty-free tea imports, meant for re-export comes to India at a very low price from origins such as Africa, Argentina, Vietnam and Nepal. These are supposed to be re-exported as multi origin tea. Many importers re-export these teas of Indian origin, while also blending a part of the imported quantity with Indian tea. Much of these imported teas are of low quality and blending such teas with Indian teas lowers the image of the tea of Indian origin.
According to Monem, in the last three years, India imported around 60 million kgs of tea from the said countries, half of which has been re-exported. The maximum imports have happened from Nepal and influx of such tea into the domestic market is hurting Indian tea industry’s interest. ” Anything between 5-10 million kgs of tea remaining in India can hurt domestic consumption, Monem said.

Data from the Tea Board show that India, between January and August this year, had produced 792.49 million kgs of tea against 670.76 million kgs during the same period last year. Whereas its exports between January and July this year dropped to 100.78 million kgs from 117.56 million kgs during the corresponding period last year. Although overall value realisation was a little higher at Rs 2,734.95 crore during the said period this year compared to Rs 2,635.76 crore during the same period last year, supplies are up in the domestic market, which has already impacted prices.

Monem said India has lost in the Egyptian, Iranian, Russian and Pakistan markets for cheaper Kenyan tea. Kenya has an advantage of zero duty exports to Egypt and a preferential trade agreement with Pakistan but India has an opportunity to gain in the Egyptian and Russian markets since the present South Indian tea prices are very attractive.
Kenyan tea was priced at around Rs 150 a kg against India’s average of Rs 271 a kg between January and July, up by Rs 47 a kg from the average prices last year during the same period. But the Kenyan government’s recent move to reserve prices at $ 2.43 a kg is likely to give a boost to Indian exports regaining the markets in West Asian, Russia and Kazakhstan since prices of South Indian Tea post-June has fallen by 50% and North Indian Tea by 23% -25%, Monem said.

Tea Board Data shows that South Indian Tea auction prices which hovered at a range between Rs 148 and Rs 115 a kg between January and June this year have fallen to Rs 101 a kg during July, August and September. Auction prices of North Indian Tea, which peaked during June at Rs 230 a kg from a level of Rs 170 a kg in January this year, has once again come down to a range between Rs 202 and Rs 188 a kg.

However, the threat persists not only from Nepal but also from Vietnam, Indonesia and Malaysia because these countries have the potential to offer average quality tea at much lower prices, a Tea Association of India (TAI) official said.

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