EXPORT OF COMMODITY (TEA FROM INDIA)

Submitted To: Prof Amrinder Singh

Submitted By: Anupreet Bhatia 319 MBA GB 2

INDIAN TEA INDUSTRY

The tea industry in India is about 172 years old. It occupies an important place and plays a very useful part in the national economy. Robert Bruce in 1823 discovered tea plants growing wild in upper Brahmaputra Valley. In 1838 the first Indian tea from Assam was sent to United Kingdom for public sale. Thereafter, it was extended to other parts of the country between 50's and 60's of the last century.However, owing to certain specific soil and climatic requirements its cultivation was confined to only certain parts of the country. Tea plantations in India are mainly located in rural hills and backward areas of North-eastern and Southern States. Major tea growing areas of the country are concentrated in Assam, West Bengal, Tamil Nadu and Kerala. The other areas where tea is grown to a small extent are Karnataka, Tripura, Himachal Pradesh,Uttaranchal, Arunachal Pradesh, Manipur, Sikkim, Nagaland, Meghalaya,Mizoram, and Bihar. Unlike most other tea producing and exporting countries, India has dual manufacturing base. India produces both CTC and Orthodox teas in addition to green tea. The weightage lies with the former due to domestic consumers

preference. Orthodox tea production is balanced basically with the export demand.Production of green tea in India is small. The competitors to India in tea export are Sri Lanka, Kenya, China, Indonesia and Vietnam. Tea is an agro-based commodity and is subjected to vagaries of nature. Despite adverse agro climatic condition experienced in tea growing areas in many years, Indian Tea Plantation Industry is able to maintain substantial growth in relation to volume of Indian tea production during the last one decade.There has been a dramatic tilt in tea disposal in favour of domestic market since fifties. While at the time of Independence only 79 M.Kgs or about 31% of total production of 255 M.Kgs of tea was retained for internal consumption, in 2008 as much as 802 M.Kgs or about 82% of total production of 981 M.Kgs of tea went for domestic consumption. Such a massive increase in domestic consumption has been due to increase in population, greater urbanisation, increase in income and standard of living etc. Indian tea export has been an important foreign exchange earner for the country. There was an inherent growth in export earnings from tea over the years. Till 70s, UK was the major buyer of Indian tea Since 80s USSR became the largest buyer of Indian tea due to existence of the trade agreement between India and erstwhile USSR. USSR happened to be the major buyer of Indian tea accounting for more than 50% of the total Indian export till 1991. However, with the disintegration of USSR and abolition of Central Buying Mechanism, Indian tea exports suffered a set back from 1992-93. However, Indian Tea exports to Russia/CIS countries recovered from the setback since 1993 under Rupee Debt Repayment Route facilities as also due to long term agreement on tea entered into between Russia and India. Depressed scenario again started since 2001 due to change in consumption pattern, i.e. switch over from CTC to Orthodox as per consumer preference and thus India has lost the Russian market. Another reason for decline in export of Indian tea to Russia is offering of teas at lower prices by China, South Asian countries like Indonesia and Vietnam. The major competitive countries in tea in the world are Sri Lanka, Kenya, China and Indonesia. China is the major producer of green tea while Sri Lanka and Indonesia are producing mainly orthodox varieties of tea. Kenya is basically a CTC tea producing country. While India is facing competition from Sri Lanka and Indonesia with regard to export of orthodox teas and from China with regard to green tea export, it is facing competition from Kenya and from other African countries in exporting CTC teas.

Because of absence of large domestic base and due to comparatively small range of exportable items, Sri Lanka and Kenya have an edge over India to offload their teas in any international markets. This is one of the reasons of higher volume of export by Sri Lanka and Kenya compared to India. Another important point is that, U.K has substantial interest in tea cultivation in Kenya. Most of the sterling companies, after Indianisation due to implementation of FERA Act started tea cultivation in Kenya. So, it makes business sense for U.K. to buy tea from Kenya and Kenya became the largest supplier of tea to U.K. Tea is an essential item of domestic consumption and is the major beverage in India. Tea is also considered as the cheapest beverage amongst the beverages available in India. Tea Industry provides gainful direct employment to more than a million workers mainly drawn from the backward and socially weaker section of the society. It is also a substantial foreign exchange earner and provides sizeable amount of revenue to the State and Central Exchequer. The total turnover of the Indian tea industry is in the vicinity of Rs.9000 Crs. Presently, Indian tea industry is having (as on 18.12.2009 ) 1692 registered Tea Manufacturers, 2200 registered Tea Exporters, 5848 number of registered tea buyers, Nine tea Auction centres.

STATISTICS
Tea Production (kg) 2008-09: South India 238.74 million, All India 972.77 million 2007-08: South India 227.06 million, All India 945.27 million Tea Exports (kg) 2008-09: South India 86.14 million, All India 183.99 million

2007-08: South India 75.17 million, All India 185.32 million

This is a list of countries ordered by annual per capita consumption of tea, as of 2007 & 2010
Rank 1 2 2 4 5 6 7 7 9 10 10 12 13 13 15 15 17 17 17 20 20 20 23 23 23 23 23 23 29 29 31 Country Tea consumption Turkey 2.1 kg (74 oz) United Kingdom 2.0 kg (71 oz) Ireland 2.0 kg (71 oz) Iran 1.4 kg (49 oz) 1.2 kg (42 oz) Morocco Egypt 1.1 kg (39 oz) New Zealand 1 kg (35 oz) Poland 1 kg (35 oz) 0.9 kg (32 oz) Japan Netherlands 0.8 kg (28 oz) Australia 0.8 kg (28 oz) 0.75 kg (26 oz) India Pakistan 0.7 kg (25 oz) Germany 0.7 kg (25 oz) 0.6 kg (21 oz) China Chile 0.6 kg (21 oz) 0.4 kg (14 oz) Norway 0.4 kg (14 oz) Switzerland Sweden 0.4 kg (14 oz) 0.3 kg (11 oz) Austria Argentina 0.3 kg (11 oz) Finland 0.3 kg (11 oz) United States 0.2 kg (7.1 oz) Canada 0.2 kg (7.1 oz) France 0.2 kg (7.1 oz) 0.2 kg (7.1 oz) Denmark Peru 0.2 kg (7.1 oz) 0.2 kg (7.1 oz) Bolivia Belgium 0.1 kg (3.5 oz) 0.1 kg (3.5 oz) Italy Ethiopia 0.09 kg (3.2 oz)

Indias share in world tea exports declines 2% in 2005-09

Between 2005 and 2009, Indias share in world tea exports declined from 15 per cent to 13 per cent, while Chinas share during the same period increased from 16 per cent to 19 per cent and Kenyas from 19 to 22 per cent, according to a study by the Indian Tea Association (ITA). In 2005, China pipped India to become the worlds largest producer of tea. In 2009, Chinas export was around 300 million kg including 230 million kg of green tea as against Indias 197 million kg, entirely black tea. In 2010, Chinas exports, according to official sources, will rise two per cent over 2009 figure. The major buyers of Indian tea are Iraq and CIS (21 per cent each), Iran and the United Arab Emirates (13 per cent), the UK and Ireland (11 per cent), Pakistan (7 per cent), the US and Canada (4 per cent), Afghanistan (4 per cent), Kenya (4 per cent), Germany and the Netherlands (3 per cent), Poland and Australia (2 per cent each) and others (7 per cent). Chinas major export markets are Morocco, the European Union, Japan and the US. Chinas exports of flower tea and fermented tea produced in South-West Yunan province are showing a downward trend, according to the countrys first tea report launched by the China Social Science Academy Press.

India's tea exports decline in 2010

Failing to meet the target of 200 million kg tea export set for 2010, shipments of the beverage from India actually declined by 2.4 per cent to 193.3 million kg during the period in sync with dip in production. According to data released by Tea Board, India had achieved 198 million kg tea exports in 2009. Former Tea Board Chairman Basudeb Banerjee in November last year had said the Board has set 200 million kg export target for 2010. India's tea output declined by 1.3 per cent to 966.4 million kg in 2010 against 979 million kg in the year-ago period due to a drop in output in Assam, which produces more than half of country's total tea production due to adverse weather and pest attacks. In 2008, India's tea exports went well passed 200 million kg. The fall in exports is indicative of its losing ground to other major producers like Sri Lanka for the orthodox variety and Kenya for CTC tea. Even, new entrants in the world export markets like, Vietnam and Indonesia are giving Indian tea a run for the money. Meanwhile, exports of tea from India to Pakistan is on the rise and that too by a phenomenal margin. In 2010, India registered exports of 20 million kg tea to Pakistan from just around 5-6 million kg a year-ago.
"In Russia also, our exports are rising. This time we are expecting to export

about 40-45 million kg. Besides, exports to Iran is also set to be 15 million kg," Patra said. He said the production in the current year is likely to increase compared to last year.

"Though exports have fallen in 2010, but with rise in exports to Russia, Pakistan and Iran, I think we will get good results in the current year," Patra added.

ESTIMATED EXPORTS OF TEA FROM NORTH & SOUTH INDIA

ESTIMATED EXPORTS OF TEA FROM NORTH & SOUTH INDIA

Qty ( Th. Kgs) 9,189 5,560 14,749 11,838 7,678 19,516 102,477 90,816 193,293 110,530 87,373 197,903 70,049 69,252 Value ( Th. ) 154,20,91 61,51,12 215,72,03 192,71,23 81,94,95 274,66,18 1700,76,15 894,44,79 2595,20,94 1788,00,26 997,84,39 2785,84,65 1188,44,68 669,93,36 Unit Price ( / Kg ) 167.82 110.63 146.26 162.79 106.73 140.74 165.97 98.49 134.26 161.77 114.21 140.77 169.66 96.74

Period

Region North India

December 2010* * South India All India North India December 2009 @ South India All India North India January to December 2010 * South India All India North India January to South India December 2009 @ All India April to December North India 2010 * South India

All India North India April to December South India 2009 @ All India * Estimated

139,301 90,160 69,282 159,442

1858,38,04 1489,04,19 812,81,79 2301,85,98 @ Actual

133.41 165.16 117.32 144.37

India likely to keep tea export target at 200 mn kg for 2011

Despite failing to reach the 200 million kg tea export target for the last two years, Tea Board of India today said it is hoping to achieve it this year on hopes of a better output. "Our target for the current year is in the range of 200 million kg, it is the thumb mark for us," Tea Board Deputy Chairman Roshni Sen said. The last time the country had exported 200 million kg tea was in 2008. The Tea Board had aimed to achieve the same in 2010, but only managed to dock 193.29 million kg due to lower yield in Assam. Tea production in Assam, which contributes around 70 per cent of the North India's production and produces the premium varieties of the beverage, was last year severely hampered by bad weather and pest attacks. Besides, the decline in exports is also indicative of India losing ground to other major producers like Sri Lanka for orthodox variety and Kenya for CTC (Crush-Tear-Curl) tea. Even, new entrants in the world export markets, like Vietnam and Indonesia are giving Indian tea a run for the money, according to an industry insider. Tea exports from the country stood at 198 million kg in 2009. This year, the Board would be focussing on the US, Russia, Kazakhastan, Iran and Egypt to boost its exports. India would target these markets with high-end and value-added varieties, said Sen.

Indian Tea Association Joint Secretary Sujit Patra said India was expecting to ship about 45 million kg tea this year to Russia and around 15 million kg to Iran. Also, the tea board is expecting good demand for Indian tea from Pakistan, much like the past year. However, since the market there is price-sensitive, it would be treated with CTC variety, it said. In 2010, India exported 20 million kg tea to Pakistan from just around 5-6 million kg a year ago.