Sri Lanka Crisis A Boon For Indian Tea Exporters? Know What Experts Have To Say

Sri Lanka News: Sri Lanka produces around 300 million kg of tea annually and is predominantly an orthodox tea producer. The country exports around 97-98 per cent of its annual output.

Sri Lanka News | New Delhi: Sri Lanka economic crisis may prove to be a boon for Indian tea exporters, experts stated. Sri Lanka, which is a leading tea exporter, has been facing immense financial hardships since the inception of the Covid-19 pandemic. The country has declared an emergency and the cabinet, except Sri Lankan Prime Minister Mahinda Rajapaksa, has resigned. According to reports, Sri Lanka is expected to see a major decline in tea production and shipments in the coming days.

Sri Lanka produces around 300 million kg of tea annually and is predominantly an orthodox tea producer. The country exports around 97-98 per cent of its annual output, rating agency ICRA Ltd’s vice president Kaushik Das said. With the growing economic crisis in the island country, tea factories are struggling to run their operations, said South India Tea Exporters Association chairman Dipak Shah who had recently returned from Sri Lanka’s capital Colombo.

Sri Lanka accounts for around 50 per cent, if not more, of the total global trade of orthodox tea and exports the beverage to mostly west Asian countries such as Iraq, Iran and UAE, and North African destinations like Libya along with Russia and Turkey, he said.

“A significant fall in Sri Lanka’s tea production will have an impact on the global market and also provide an opportunity for Indian exporters to fill the gap,” Das said.

Much Better If Rupee-Ruble Mechanism Goes Forward

Das also added that such a scenario could provide “much better days for Indian exporters”, particularly if the trade with Russia gets improved with a rupee-ruble payment mechanism.

“Almost all units in Sri Lanka are witnessing power cut for almost 12-13 hours a day and have not enough fuel to run their generators. Generally, disruption in the production process leads to a decline in quality. Apart from this, there is less rain. I think the production could fall by 20-25 per cent in our neighbouring country,” Deepak Shah added.

Indian Tea Exporters’ Association Chairman Anshuman Kanoria said the industry is expecting that the island country’s crop might be lower by around 15 per cent this year because of its economic condition.
“Shortages of fertiliser, diesel and other production inputs would hit its output. We have already seen international buyers, who need Sri Lankan tea for their blend, have started paying higher prices as tea from that country has become expensive by around 10-20 per cent,” he told media.

Indian, Sri Lankan Teas Popular In Russia

Both Indian and Sri Lankan orthodox teas are popular in Russia, and India’s dependence on the CIS country for the export of the beverage is significant. “The demand for Indian orthodox tea could go up with the shortage of Sri Lankan variety. However, international buyers have allegiance to Sri Lankan tea and their logo, despite the shortage of the crop,” Shah said.

Echoing Shah, Kanoria said Russia, like India, is also an important market for Sri Lanka, and traders in the neighbouring country are also facing problems in transporting the commodity to the CIS country with a dearth of containers. With the war situation, Russian buyers were out of the market for the last three-four weeks but now they are returning and this could put more pressure on the prices of Sri Lankan tea, Kanoria said.

(With PTI inputs)