By Chandeepa Wettasinghe
Sri Lanka’s tea exports to India have increased exponentially, driven by Indian traders who may be trans-shipping to Iran at more competitive prices using their unofficial rupee-denominated currency swap arrangement with the oil rich sanctioned country.
“If you look at the figures, leading up to 2014, we were only exporting about 300,000 to 400,000 tonnes a year. It then jumped to 1.4 million tonnes in 2014 and we’ve almost exported nearly the same amount in the first three months of this year,” Sri Lanka Tea Exporters’ Association Former Chairman Niraj De Mel said.
He said that the Indian tea traders were making use of the quotas underutilized by the Sri Lankan traders in the Indo-Lanka Free Trade Agreement (FTA) to make profits.
The FTA stipulates that Sri Lanka can only export 15 million tonnes of tea, as India mainly consumes tea produced locally.
According to De Mel, Sri Lankan traders had not made use of the facility, as India had allocated only two ports through which Sri Lanka could ship their cargo.
“It was not cost effective to market and distribute from those two ports. But the Customs chief told me that all the ports were opened in 2007. No one in the Tea Board or any exporter was informed of this,” he said.
While this may show a lack of responsibility on the part of the government, De Mel said that the exporters would have come across the information a long time ago if they were keen to export. He further added that a market for highly priced and marketed Ceylon tea could be established among the elite and the urban upper-middle classes in India and Pakistan by making use of the FTAs, similar to the strategy being undertaken to promote Ceylon tea in China, ahead of the currently negotiated Sino-Lanka FTA.
Sri Lankan tea traders could also evaluate whether the facilities in India could provide a cheaper avenue to sell a segment of tea to Iran, which is Sri Lanka’s third largest tea market, following Turkey and Russia.