By Dan Bolton
Indian tea exports to Pakistan have dropped by half. Re-exports of Indian tea through the United Arab Emirates typically fill the gap when political tensions rise between these two nations, but not this time. Tea shipments from India to Dubai fell by 38% through August.
Direct exports to Pakistan through August totaled 3.14 million kilos compared to 6.17 during the same period during the previous year. Revenue declined from $9.02 million to $4.80 million. Pakistan, one of the world’s largest tea importers, generally spends about $560 million per year.
Exporters told the Business Standard “nobody want to sick his neck out and be seen as exporting to Pakistan at a time when cross-border skirmishes are common and Pakistan’s assertions of the withdrawal of Kashmir’s special status are creating controversies.”
Onerous tariffs following a February suicide attack that killed 40 Indian national police offices near Pulwama also play a role. In February an SUV carrying explosives rammed a police convoy killing 40 national police officers.
In protest, India immediately withdrew Most Favored Nation (MFN) trading status, an agreement that lowers barriers to trade. The MFN status was first granted in 1996. India also imposed a 200% duty on any goods imported from Pakistan which is the world’s third largest tea importer
Pakistan imported 15.83 million kilograms of India tea in 2018, up by about 7.5% 14.73 million kilograms shipped in 2017. Exports to Pakistan are estimated at $21 million during the calendar year 2018 against $19.9 million the previous year.In the past buyers shipped to hubs like Dubai and then to the intended final buyer in Pakistan. Pakistani buyers made payments direct to Indian exporters, not through intermediaries. “This time, however, such re-routing of tea is also not happening,” an tea exporter laments. Pakistan has turned instead to suppliers in Kenya and Sri Lanka. Traceability is an issue that did not complicate transactions in the past, according to exporters.