India’s tea industry is on tenterhooks as Russia wages war on Ukraine

News: The Russia-Ukraine crisis has impacted the Indian tea exports to the region into disarray with port disruptions and payment delays hitting shipments.

About India’s Tea exports to Russia

Russia is among the top two buyers of Indian tea (the other being Iran) accounting for about 18% of the total tea exports. 

However, Indian tea exports to Russia are impacted due to a) inability expressed by shipping lines to deliver the cargo to war-hit or countries facing sanctions and b) banks refusing to accept payments.

This disruption has mostly affected the South Indian Region, as substantial tea exports take place from this region during this time. (South India accounts for about 18% of total tea production in India).

Moreover, this conflict has broken out at a time when tea exports are yet to recover from the blow dealt by Covid-19. 

How will this impact the domestic tea industry?

The Indian tea industry largely caters to the domestic market. Yet, exports are vital to keeping the domestic demand-supply in balance.

For instance, if exports are impacted then more tea will be available in the domestic market and that will lead to an oversupply situation, causing prices to crash, a situation that will pile pressure on a troubled industry.

What is the Indian Government doing to overcome this impact?

The Indian government is now reportedly exploring the option of allowing the rupee-ruble trade to bypass the impact of sanctions on Russia following the war on Ukraine. That has rekindled hopes for an increased offtake from Russia.

Source: This post is based on the article “India’s tea industry is on tenterhooks as Russia wages war on Ukraine” published in Business Standard on 5th Mar 2022.