Russia-Ukraine war: Tea exporters face payment crisis, drying up of fresh orders

With the ongoing Russia-Ukraine war, Indian tea exporters’ immediate concern is about the delays in payments from the buyers in these two countries and their neighbours for the shipments already made. But they are more worried about the prospect of importers from these countries finding it increasingly difficult to place fresh orders, given the steep depreciation of Russian rouble against the US dollar.

Inderchand Sitaram, a Kolkata-based major tea exporter to Russia and other CIS countries told FE that several of the consignments sent to Russia by him haven’t reached the destined ports – St Petersburgh in Russia or Odessa in Ukraine – on time.

“Most containers are lying in various ports of the Black Sea or many are still on the high seas. Our immediate concern is how to realise the revenues from the consignments that we have already been dispatched,” Sitaram said.

Other exporters who FE spoke to said Russia or the region it is part of was anyway not a market where payments were very prompt. Payments were delayed for 60 to 120 days. While bulk of the shipment took place between May and October, payments from importers were to start flowing in at around the present time. Besides the Russian rouble, which has devalued between 30% and 35%, Kazakshtan tenge has slipped in the range of 20-30% in the last 14 days, eroding the capacity of importers to pay.

A Tea Board official said, India’s tea trade with Russia has been almost round the year and Rs 65-70 crore worth of Indian tea goes to Russia every month. India exported Rs 589.11 crore worth of tea to Russia in FY21 but uncertainty now looms large on whether the exports could be maintained at this level in the next few months.

The Tea Board official said although the commerce ministry was taking every measure for consignments enroute Russia, Kazakshan and Ukraine via China, no breakthrough have been achieved as yet. “Almost all Russian tea importers have an office in Ukraine and it was like a common market,” Sitaram said.

Leading tea exporters to Russia and other CIS countries have already made representations to the government that no demurrage charge is levied in the case of consignments getting offloaded in any other ports and that payments were allowed to be received through banks of other countries.

Several banks in the CIS region have been blocked of the global financial system SWIFT and things have, therefore, become more uncertain. “Unless this immediate issue is resolved, the entire business cycle could be adversely impacted,” Sitaram said.

Azam Monem, director, Mcleod Russel, said while the industry is weighing the implications from the Russia-Ukraine crisis, finance minister Nirmala Sitharaman would be visiting Assam on Friday to listen to the industry’s concerns. “Mcleod Russel has little exposure to Russian exports. Our exports to Ukraine has always been against payments and we have stopped sending consignments there soon after the trouble broke out,” Monem said.

Nirmal Khurana, director, finance of Rossel Tea, said the next 15 days would determine the future of global tea market as the war will have a spill over effect on almost all the tea importing nations, especially Europe. “Negotiations for fresh consignments to Europe are yet to start and it would start during middle May or a little later following the second flush production,” Khurana said.