Amid the ongoing tensions between India and Pakistan, and India's withdrawal of the most favoured nation (MFN) status to Pakistan, tea exporters and producers are looking at alternative markets such as the Commonwealth of Independent States (CIS) nations and West Asian countries to sell their produce.
Exporters are of the view that while direct exports to Pakistan will be nearly nil this month, and in the coming few months, alternative markets can be explored for exporting tea, which was originally meant for Pakistan. According to Vivek Goenka, chairman, Indian Tea Association (ITA), the type of tea that goes to Pakistan can be routed and sold in Egypt, Russia, Kazakhstan, Ukraine and other east European nations.
“Russia and CIS buy a wide variety of tea, ranging from top-quality orthodox to budget teas. I think the tea exported to Pakistan can be routed and absorbed there”, he said.
Usually, Pakistan buys average quality tea from India, comprising mostly of dust and fanning, priced around $1.45 a kilo. Besides, tea is also routed to Pakistan via Dubai.
An exporter from south India said there are several instances when Indian exporters bill teas to an importer in Dubai. This consignment, after reaching Dubai, is then shipped to Pakistan. Exports to the UAE, over the years, have shot up from 16.2 million kg (mkg) in 2015 to 20.9 mkg in 2018. Interestingly, during the same period, direct exports to Pakistan fell from 19.5 mkg to 15.8 mkg.
Increasing the sales volume to UAE is also an option. "However, it has its challenges. Payment terms are often complicated and realisations take time. This is why exporters from India do not prefer selling tea this way", the exporter added. Exporters are unsure how Indo-Pak relations will play up in the near term, which might affect the payments from the sales.
Another exporter from Kolkata opined that even if tensions de-escalate, Pakistan losing the MFN status would affect trade. “On the other hand, we are noticing exports to countries such as China, Bangladesh and others are going up, which is an encouraging sign,” the exporter said.