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Exports: Sri Lanka’s economic crisis could present opportunities for Indian tea exporters: experts

KOLKATA: Growing economic problems in Sri Lanka, a major player in the world tea Market, may offer opportunities for Indian exporters of the commodity as the island nation is set to experience a significant drop in its production and supplies this year, industry officials and experts said on Monday. Sri Lanka produces around 300 million kg of tea annually and is predominantly an orthodox tea producer. The country exports around 97-98 percent of its annual output, rating agency ICRA Ltdsaid Vice President Kaushik Das.

Sri Lanka accounts for around 50 percent, if not more, of the total world trade in Orthodox tea, exporting the beverage primarily to West Asian countries such as Iraq, Iran and the United Arab Emirates, as well as North African destinations such as Libya, as well as Russia and Turkey . he said.

“A significant decline in tea production in Sri Lanka will affect the impact global market and also provide an opportunity for Indian exporters to bridge the gap,” Das told PTI.

With the growing economic crisis in the island nation, tea factories are struggling to keep operating, he said Association of South Indian Tea Exporters Chairman Dipak Shah, who recently returned from Sri Lanka’s capital, Colombo.

“Almost all units in Sri Lanka experience power outages almost 12-13 hours a day and do not have enough fuel to run their generators. In general, a disruption in the production process leads to a loss of quality. Apart from that there is less rain. I think production could drop by 20-25 percent in our neighboring country,” Shah told PTI.

He also said such a scenario could bring “much better days for Indian exporters,” especially if trade with Russia is enhanced through a rupee-ruble payment mechanism.

Indian Tea Exporters’ Association chairman Anshuman Kanoria said the industry expects the island nation’s harvest this year could fall by about 15 percent due to its economic woes.

“A lack of fertilizers, diesel and other means of production would affect production. We have already seen that international buyers who need Sri Lankan tea for their blend are paying higher prices as tea from that country has risen in price by around 10-20 cents per piece,” he told PTI.

Both Indian and Sri Lankan orthodox teas are popular in Russia, and India’s reliance on the CIS country is important for the export of the drink.

“Demand for Indian Orthodox tea may increase with shortage of Sri Lankan varieties. However, international buyers remain loyal to Sri Lankan tea and its logo despite the lack of crops,” Shah said.

Echoing Shah, Kanoria said Russia, like India, is an important market for Sri Lanka and traders in the neighboring country are also having trouble transporting the goods to the CIS country due to a shortage of containers.

Due to the war situation, Russian buyers have not been in the market for the past three to four weeks, but now they are returning and this could put further pressure on Sri Lankan tea prices, Kanoria said.

“Overall, we have already seen that South India has benefited to some extent from the shortage of Sri Lankan tea and the increased prices of its crop over the past three weeks. There are some short-term benefits, but international packers using Sri Lankan tea in their blend will not be replacing the South Indian variety anytime soon,” he said.

Explaining the global market scenario for orthodox tea, Das said that in addition to Sri Lanka, China, Vietnam and Indonesia are other major producers of the variety.

But China hardly exports orthodox varieties as it consumes heavily, he said.

“India produces around 110 million kg of orthodox tea and 90 percent of this is exported. Our tea has no competition with Sri Lanka’s tall (high altitude) variety, which accounts for about 35 percent of production. A drop in the neighboring country’s tea-grown low could help Indian exporters expand supplies,” Das told PTI.

However, Kanoria pointed out that a rise in the price of Sri Lankan tea does not mean that Indian exporters will benefit immensely as the island nation’s harvest has its own nature.

The orthodox tea from Sri Lanka used to attract much higher prices than that of Assam in many cases.

“It’s not simply replacing the price factor. International buyers buy what they need to keep their mix composition intact. A person’s grief should not be a reason for our benefit. India needs to develop its own strategy to expand its exports,” he said.

Asked if North India’s tea could find more buyers due to the crisis in the neighboring country, Kanoria said, “I don’t think North India could benefit much from this situation as varieties of Assam and Bengal tea don’t fit this demand profile.”

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Dais Johnston

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