The Hindu : Tea exports to Iraq may suffer setback

Online edition of India's National Newspaper
Thursday, Feb 20, 2003

Business

Business

Tea exports to Iraq may suffer setback

By Our Staff Reporter

KOLKATA FEB. 19. With war fears over Iraq, Indian tea exporters are expecting the worst this year. Iraq has proved to be the saviour for the country by importing over 36 million kg (January-October, 2002) from India as against 12.66 million kg in 2001. The three-fold rise in Iraqi order was in sharp contrast to the decline in exports of Indian tea to most other established markets including Russia and the CIS.

The bulk of the orders was despatched under Phase-XI of the UN sponsored food for oil programme opened in the first half of 2002. Tea was excluded from the Phase-XII order for the second half and, according to the exporting community, though invited quotations for Phase-XIII covering January-June, 2003, "chances of opening the order soon, are fewer". And, if the war breaks, all calculations will go haywire.

"The situation has already become scary," says a packet tea exporter not associated with the overcrowded Middle East markets. His concerns are more about the exporters. With the existence of Iraq market being threatened there has been a mad rush among bulk tea exporters to go for other markets. And except the latest addition of Afghanistan, which is possibly importing the cheapest orthodox teas available, they are left with only the quality markets. "The fear is: They may ruin these markets, developed by a handful of sincere exporters over a period and at the expense of substantial investments, out of sheer shortsightedness".

There are reports of third party bulk CTC exports taking place to Khazakstan, mostly through Middle East, which was so far being catered mostly with value added packet teas. Leave alone Europe, "Some even trying their hands in markets like Japan and the U.S. which are extremely quality conscious and will shut-down the doors for all if any mischief is done".

The apprehension or suspicion is not completely unfounded. Throughout the 1990's most of the Indian exporters focussed on low-value bulk tea exports to Russia, Middle East and some African countries like Libya. Today, except Egypt and Iran (which were closed for their internal reasons), almost all of these markets, except Iraq, have eroded due to `image problem' created out of export of `substandard teas'.

Russian buying has been at its lowest in 2002. They imported quality teas in substantial quantities from elsewhere. Some like Libya have maintained a de facto ban on Indian imports altogether for the third year.

Naturally "in 2002, Iraq became the last resort of the run-of-the-mill exporters, mostly engaged in third party exports, cutting each others throat out of desperation, resulting in a drop in prices even below the remunerative levels and finally compromising with quality," confirm prominent merchant exporters. Export prices to Iraq came down to Rs. 64.5 a kg on an average in 2002 from Rs. 85 a kg in 2001. Iraq offered a price range of Rs. 62 to Rs. 82 a kg for four grades of orthodox teas.

"Prices were bound to fall," says a merchant exporter to Iraq. "No less than 80 exporters bid and 40-45 got orders and about 30 were happy to receive orders as small and unremunerative as 100 tonnes on an average. When the quotations remain low, the counter offer will also remain low. And, compromise on quality is a must if OP1 grades are awarded a price of Rs. 82 a kg (Euro 1.7)".

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