Omicron threat may hit India’s winter tea exports

The threat of various stages of lockdown and closure of entry for foreigners and foreign goods in many countries due to the Omicron variant of coronavirus is seen posing a new challenge for Indian tea exports, triggering concerns in industry circles.

“Although it is too early to gauge the impact of Omicron on India’s tea shipments, we are concerned that Christmas markets are being closed in some European countries for fear of the spread of coronavirus in any variant form. Over a dozen countries have taken precautionary measures to close borders at least for a few days now,” L Vairavan, an exporter, told BusinessLine.

“Some parts of Germany have announced that rising Covid-19 cases are causing so much concern that protecting people is their priority for which lockdown is imposed. We fear that this will have a cascading impact in other parts of Europe as well. Transport restrictions mean lesser possibility to export tea,” he said.

Generally, when winter builds up in Europe and more so in the CIS with waterways freezing, transportation becomes difficult and tea exports suffer. Last year also, Covid lockdown along with harsh winter in such countries affected smooth trade for Indian tea.

“Many countries used to import our teas ahead of Christmas to build stocks during harsh winter but this year, exporters had a testing time with shortage of sea containers and prohibitive transportation cost. In some cases, importers pointed out that transportation cost was more than the tea in the container,” Vairavan said.

Venkitaraman Anand, CEO & Whole Time Director, Harrisons Malayalam said that tea exports during the period Jan-Aug dropped by around 12 per cent and it is bound to drop further in the wake of Omicron threat and the rise in Covid cases in Europe, especially in Germany. The European markets are shut for Christmas vacations by the middle of December and hopefully the threat of infection from the Omicron virus subsides by the time the markets reopen after Christmas and New Year.

However, a senior official in a leading tea manufacturing company said that the impact would be minimal considering the quantum of exports due to winter in the wake of lower tea production across the country. If the crisis deepens, there could be an effect on tea shipments to Europe. Of the 220 million kg tea exports, he said that the winter sales will be very minimal and this has come down due to logistics disruptions.

Tea consumption is on the higher side in winter in European markets and besides India, Kenya and Sri Lanka are catering to the market, the official said.

Rise in prices

Till August, the latest period for which Tea Board’s official data are available, the price of exported Indian tea rose to an average of ₹272.92 a kg from 230.84 in Jan-Aug 2020, marking an increase of 18.23 per cent.

However, the higher price pulled down the volume shipped to 118.84 million kg (mkg) from 134.47 mkg in Jan-Aug 2020 – a decline of 11.62 per cent.

Due to the higher price, the overall earnings from exports rose to ₹3,243.37 crore from ₹3,140.04 crore in Jan-Aug 2020 – a gain of 4.49 per cent.

Germany matters a lot to Indian tea exports price-wise and earnings-wise. Germany is among the few countries which bought a higher volume of tea from India this year paying a higher price than last year. This year, Germany imported 5.78 mkg during Jan-Aug (5.16 mkg in same period last year) at ₹343.84 a kg (₹250.47 a kg) spending ₹198.74 crore (₹129.24 crore).

The CIS continued to top India’s tea export table but with a lower volume, price and value than last calendar. CIS imported 28.18 mkg (34.51 mkg) at ₹188.44 a kg (₹164.97), spending ₹531.02 crore (₹569.32).

Volume-wise, Iran followed at 15.47 mkg (23.87 mkg) paying ₹254.74 a kg (₹267.23) and spending ₹394.08 crore (₹637.87 crore).

Price-wise, Ireland paid the highest price of ₹748.65 a kg (₹742.59).

Value-wise, next to the CIS, the USA topped at ₹408.23 crore (₹254.40 crore).

(with inputs from V Sajeev Kumar in Kochi)