Iran set to topple Russia as India's largest tea importer

Under the trade agreement between India and Iran, the West Asian country can pay India in rupees for its imports against oil exports to India, which New Delhi pays for in Iranian rial.

Iran is set to overtake Russia this year as the largest inporter of Indian tea, despite the US sanctions on trade that it is facing.

Exports to Iran hit a record high of 43.76 million kg (mkg) this year till September, earning India a forex of $172.84 million.

Sources said owing to the US sanctions on Iran, other exporting countries like Sri Lanka have found it hard to sustain their shipments.

After the sanctions were imposed, there was some uncertainty over how payments would be made, given that Iran did not have adequate foreign exchange.

However, under the trade agreement between India and Iran, the West Asian country can pay India in rupees for its imports against oil exports to India, which New Delhi pays for in Iranian Rial.

“This trade agreement has not only helped India sustain the market but expand it as well.

"While exports from other countries faced uncertainty, Indian exporters were able to eat into the competition and gain market share,” a planter, who directly exports bulk tea to Iran, told Business Standard.

Between January and October, with India maintaining focus on Iran and increasing its exports to that country, Ceylonese tea shipments to Iran dipped by 9.52 per cent to 18.27 mkg.

Data sourced from the Tea Board showed that between January and September, export of tea to Iran rose by 115.67 per cent to touch 43.76 mkg, while the forex income soared by 133.38 per cent at $172.84 million.

In comparison, exports to Russia and other CIS countries were down 11.46 per cent, to 41.72 mkg and forex inflow shrank by 12.99 per cent, to $97.81 million.

Historically, Russia has been the largest importer of India tea, and exports to Russia and CIS taken together, usually account for 25-30 per cent of total Indian tea exports.

Till September this year, however, exports to Russia and CIS made up 22.85 per cent while Iranian imports accounted for 23.97 per cent of the total 182.52 mkg dispatched.

Earnings from Iran far outpace the contribution from Russia and CIS.

Iran accounted for 29.19 per cent of the Indian tea trade in terms of value while Russia accounted for 16.52 per cent in terms of trade value.

Analysing the current trade scenario, exporters are of the view that Iran will top the chart this year emerging as the top tea exporting destination for India and Russia will finish second in the run.

“What is interesting to note here is the fact that export prices have also risen”, A.K. Ray, deputy chairman at the Tea Board told this newspaper.