Indian tea exporters seeking special exchange rate from Iran

Financial Tribune – The Indian tea industry has sought a special exchange rate from Iran for tea exports to the country after November 4 when US sanctions will restrict sales of oil and petrochemical products to the country.

A high-level delegation of government officials and tea trade executives from Iran is expected to visit India in the third week of October to hold talks on financial and other issues, The Economic Times reported.

Payments from Iran have slowed down in the past four weeks for new contracts and leading exporters to the country said orthodox teas are piling up at their end.

“It is not yet clear whether tea will be put in the priority list along with pharmaceuticals and other essential commodities,” said Azam Monem, chairman of Indian Tea Association.

“We have sought a special exchange rate for tea whereby the Iranian buyer can buy tea paying lesser rials. This can only happen if tea is kept in the priority list. We want to get a clear idea about tea when the Iranian delegation comes to India.”

Last week, there was speculation that Iran will come out with a clear-cut policy on tea, which lifted the mood in the market. Of the total orthodox teas offered in the auctions last week, only 24% were left unsold. In the previous week, the total volume of unsold teas was as high as 45%.

“The Iranian government was supposed to put in place some regulation regarding tea,” said Binod Bansal, a leading tea exporter to Iran.

“But that is yet to happen. There is [a] lot of uncertainty in the market right now. Payment flow has slowed down though it has not stopped.”

Bansal said exporters were in touch with tea importers in Iran as well as the Tea Board of India and the commerce ministry.

India exports 29-30 million kg of orthodox tea annually to Iran. Sri Lanka, which produces only orthodox teas, shipped 22 million kg of tea to Iran in 2017.

Indian exporters mostly receive payments in rupees for exports to Iran under a mechanism worked out in 2012 when banking channels were restricted during the earlier round of US sanctions. Indian companies receive payments for exports to Iran using the oil payments held in rupee balances at UCO Bank.

“There are a lot of queries from Iran,” said Monem of Indian Tea Association.