CAIRO: According to the Ministry of Investment, the country has slashed taxes on Indian tea from 30 percent to five percent, thus brightening the future of Indian tea in Egypt by allowing Indian exporters to re-enter the Egyptian market.
The largest exporter to Egypt in the early 1980s, India lost its foothold to Sri Lanka and then to Kenya, the latter paying only three percent duty in Egypt since 1998 as opposed to the 30 percent due on Indian exports, making Indian tea more expensive and consequently discouraging Indian tea exporters.
The introduction of a special concession duty in 1998 also added to India s decline in tea exports to the country. In 2000, the country exported a diminutive 8.7 million kg to Egypt against 59 million kg by Kenya. Sri Lanka, on the other hand, managed to maintain its share at 10 million kg, according to Frontline, an Indian national magazine.
The revised rate, however, and the serious droughts in Kenya, which are leading tea-drinking nations to top up their national tea reserves from other countries, have given Indian tea exporters a strong advantage, especially since Egyptians prefer to drink CTC tea (tea further processed by crush, tear and curl).
Enquiries from Egypt have excited the Indian Tea Association (ITA) and tea exporters alike, with the ministry quoting inside sources as saying that the country sourced nearly 90 percent of its 100 million kg of annual imports from neighboring Kenya.
ITA also says that tea buyers from Pakistan and China are joining Egyptian merchants in the tea market.
A shift in tea drinking behavior toward increased use of tea bags and soluble instant tea has effectively reduced the quantity of tea needed per cup and also increased the demand for cheaper tea at the expense of higher quality tea. This change will affect competition and price value in the global industry. In fact, according to the Ministry of Investments, exporters believe that time will be required to work out the blends that consumers prefer.
According to a report on the tea market carried out by markettradefair.com, the growth of more convenient forms, such as tea bags, has led to a paradox; while demand for tea products may increase, less tea is required to satisfy that demand.
Unlike coffee, a large proportion of the world’s tea is consumed in producing countries. India is both the world’s largest producer of tea and the world’s thirstiest consumer. While India produces almost 30 percent of the world’s tea, it exports less than 20 percent of the world’s supply, according to the study.
Given that tea is consumed in areas of growing population, the potential for increased demand for tea across the world is great, but it faces stiff competition from soft drinks. To counter this trend, the tea industry is actively trying to promote consumption by emphasizing the health benefits of tea. The promotion of ready-to-drink tea is also being explored on the assumption that it can better compete with soft drinks, according to the study.
The various tea blend preferences in different countries also pose a challenge to producers. Exporters have found that they must cater to different markets. Major tea buyers in the Middle East want a very different product from what is in demand in Europe.
The United Arab Emirates buys low grade Sri Lankan tea, which is not at all in demand in the United Kingdom, which is only willing to pay a paltry sum for top quality Kenyan tea. Tea producers, therefore, must find a market for each, which means they export lower quality tea, in lesser amounts, for a smaller sum. While not a profitable formula, for Indian exporters, the reduction of tariffs in tea drinking nations such as Egypt will definitely reap financial benefits.
