Climate Change: India’s Tea Industry Selling More Product To Iran, But Future In Jeopardy



  • Iran is about to replace Russia as India's largest tea importer

  • Iran pays India through a complicated payment mechanism

  • South Indian tea industry is threatened by climate change
  • The Indian tea industry is not only witnessing shifts among its global buyers, but also suffers from stagnant growth due to climate change and its impact on tea plantations.

    With respect to foreign markets, Iran is about to replace Russia as the largest importer of Indian tea this year and flurry of US sanctions on Tehran.

    During the first nine months of this year, Iran imported about 48,237 tons of tea from India, and 115.7% surge from the first nine months of 2018 that generated earnings of $ 172.84 million for India.

    In contrast, tea exports to Russia dropped by 11.5% in that period to 45.988 tons while earnings from this trade contracted by 13% to $ 97.81 million.

    While Russia has historically been the biggest importer of Indian tea – typically accounting for 25% to 30% of all Indian tea exports – so far this year it has tallied a 22.85% share, versus 23.97% for Iran.

    But selling anything to a pariah nation like Iran is not easy.

    To get around U.S. banking sanctions, under a complex trade agreement and payment mechanism between New Delhi and Teheran, India receives payments from Iran in rupees and deposits them into Iran’s account against the oil India purchased from Iran. Iran then uses these funds to make payments to Indian exporters for goods sold to Iran in rupees. The transactions are conducted through India’s UCO Bank.

    “This trade agreement has not only helped India sustain the [tea] market but expand it as well. While [tea] exports from other countries faced uncertainty, Indian exporters were able to eat into the competition and gain market share,” an Indian tea planter told the Business Standard newspaper of India.

    Indeed, another tea exporting nation Sri Lanka found some difficulties in dealing with U.S. sanctions against Iran. As a result, between January and October, Sri Lankan tea shipments to Iran dipped by 9.5% compared with 2018.

    A.K. Ray, deputy chairman of the Tea Board of India, an agency of the Indian government, noted rising tea exports have been accompanied by increasing export prices – about 11% higher than last year.

    Ray said export prices rose because the government insisted on higher quality tea slated for overseas sales.

    While tea exports to Iran have surged this year, overall tea shipments were basically flat compared to 2018. Through the first 10 months of 2019, India exported about 227,837 tons of tea, down slightly from 229,677 tons in the same period last year.

    Pakistan is now importing 80% of its tea from Kenya.

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