Tea Exports from India

Share of value added tea in India's export basket is coming down despite increase in the unit price. According to the Tea Board's estimates the share of value added tea in the Indian export basket has dropped from 83 million kilogram in 1995 to 24 million kilograms in 2008. It has further come down to 28 million kilogram in 2009.

Russia imports only 35000 tonnes out of 200000 tonnes of tea Indian exports annually.

On the other hand price of value added tea has gradually improved from Rs 94.27 per kg in 1997 to Rs 110.26 per kg, Rs 210.81 per kg and Rs 237.03 per kg. Meanwhile, total tea export during 2010 is likely to be 190 million kilograms as against 196 million kilograms in 2009 and 219 million kilograms in 2006.

According to Aditya Khaitan, chairman of Indian Tea Association (ITA), Indian tea looses its competitiveness against countries like Kenya and Sri Lanka primarily due to higher cost of production.

Indian tea is a part of Russian history. There was a time when the USSR imported only Indian tea.

95% or more of India’s imported tea is loose leaf, since there is a big difference in customs duties on loose leaf and packaged tea. While a zero duty is paid on loose tea, package tea from India – if the supplier has a certificate of origin – is subject to a 15% duty. Plus a VAT of 18%; you can calculate how much it makes. As a result, very little loose leaf tea is imported. Up until the 1990s, imports from India were between 100,000 and 120,000 tonnes a year. This figure has now dropped to 35,000 tonnes. In fact, Indian tea has almost disappeared from the market, giving way to deliveries from Sri Lanka.

However, India, the world's largest tea producer is facing rising competition in the world tea market. Sri Lanka another major tea producer and strong competitor of the Indian tea market faces similar problems. Tea, in these countries is currently on a downward trend with reduced demand followed by an overabundance of tea. Tea prices have been falling worldwide because of an oversupply in production. While world market prices in real terms have declined, the cost of production has increased steadily, cutting producers costs. Moreover, big buyers like Russia, Iran and Iraq have become inactive due to political reasons. Changing consumption patterns have also contributed to the decline in tea prices. Despite, Sri Lanka's concerns over the tea market, the country has also gained momentum over India in the tea market.