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Orthodox tea prices fall as banks lose interest in issuing letters of credit

Prices of orthodox teas, which are largely exported to Iran, have fallen 9.1% year-on-year as Indian banks are not showing interest in rupee-denominated letters of credit for doing business in Iran, said senior executives.

This is a fallout of the uncertainty in Iran after the US re-imposed economic sanctions on the country, they said.

“We are seeing that banks are not willing to issue rupee-denominated letters of credit for exporting teas to Iran. This has been happening for the past two to three weeks,” Indian Tea Association chairman Azam Monem told ET.

“This development has affected prices of orthodox teas. However, we are hopeful that there would be more clarity in the weeks to come as both India and Iran are exploring means to continue oil trade and discuss banking channels,” he said. The premium orthodox teas were fetching a price of Rs 216.63 per kg last week, as compared to Rs 238.32 per kg a year ago. This came after exports from India to Iran increased 13.59% year-on-year during January-May to 10.36 million kg, according to Tea Board data. India exports 29-30 million kg of orthodox teas to Iran annually. Imported tea accounts for about 95% of the tea consumed in Iran, with Sri Lanka and India accounting for nearly 90% of imports. The total tea consumption in Iran is estimated at 1,20,000 metric tonnes per year, of which 98% is black tea. But even as there has been a drop in orthodox tea prices on account of uncertainty in Iran, prices of dust teas have risen about 9% compared to a year ago as leading blenders are buying good volumes of tea bags, the consumption of which is picking up in the country.

 

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