Sri Lanka’s economic crisis may enhance demand for Indian orthodox tea

Escalating economic concerns in Sri Lanka, a major player in the global tea market, may provide opportunities for Indian exporters of Indian orthodox tea, as the island country is set to witness a significant decline in its production and shipments this year, according to rating agency ICRA’s research paper.

According to ICRA, Russia has been one of India’s largest export destinations. But teas exported there have been of the plain to medium varieties, with Russia meeting its requirement of premium category teas from Sri Lanka.

Sri Lanka produces around 300 million kg of tea annually and is predominantly an orthodox tea producer. The country exports around 97-98 per cent of its annual output. Sri Lanka accounts for around 50 per cent of the total global trade of orthodox tea. It exports mostly to west Asian countries such as Iraq, Iran and UAE, and North African destinations like Libya along with Russia and Turkey.

With the growing economic crisis in the island country, tea factories are struggling to run their operations. Almost all units in Sri Lanka are witnessing power cuts for almost 12-13 hours a day and have not enough fuel to run their generators. Generally, disruption in the production process leads to a decline in quality.

It is likely that tea production may drop by 20-25 per cent in Sri Lanka. The global production of orthodox (ODX) teas, excluding China, has remained flat over the last decade.  Moreover, Sri Lanka has also been impacted in recent months due to withdrawal of the use of chemical fertilisers around mid-2021. In the international market, ODX supplies from India directly compete with the low grown ODX in Sri Lanka, which accounts for nearly 65 percent of total production. India produces around 110 million kg of orthodox tea and of that 90 per cent is exported. Indian tea has no competition with Sri Lanka’s high grown (high altitude) variety that contributes to only 35 per cent production.

Leave a Reply

Your email address will not be published.