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Thursday, 6 February, 2003, 13:08 GMT
War threatens South Asian tea
Tea plantation near Kandy, Sri Lanka
Cheaper teas remain unsold as war looms
Tea producers from the world's leading exporters - India and Sri Lanka - have warned a war with Iraq will seriously affect their businesses.

"Already the Indian tea industry is in a bad shape and the situation could take a turn for the worse if there is a war in Iraq," said D.M. Jain, president of the Indian Tea Association (ITA).

His comments come after Sri Lanka's tea factory owners issued a similar assessment.

Tea has seen "a drop in prices and less demand mainly in the low grown sector due to the impending war in Iraq," Sarath Samaraweera, chairman of the Private Tea Factory Owners Association said last week.

Both countries record substantial sales in the Middle East, which is also a key shipping route to their European markets.

Market destruction

A war in Iraq could literally destroy one of India's biggest growth markets.

In the first 10 months of 2002, India exported 36.3 million kilogrammes of tea to Iraq under the "food-for-oil" programme, triple the amount sold the previous year.

India's recession-hit tea industry - which produced 854 million kilogrammes and exported 179.79 million kg in 2001 - has recorded four successive years of weak global and domestic prices.

Prices for some teas have fallen more than 30% to below their production cost.

Trade route fears

The Sri Lankan government plans to subsidise its tea factories and small growers because of the low prices, the Daily News newspaper reported, quoting Plantation Industries Minister Lakshman Kiriella.

Auction prices have fallen in the world's biggest exporter - which sold 287 million kgs in 2002 - because traders fear shipments could be stranded at sea if there is a war.

Sri Lanka's "low-grown" teas, which are favoured by the Middle Eastern market, have dropped between 10 and 15% in price over the last month, and large quantities reportedly remain unsold.

About 40% of Sri Lanka's tea goes to the Middle East and 6.1% to Iraq last year.

The Commonwealth of Independent States - the former Soviet bloc - is Sri Lanka's largest market, much of which tranships through the Middle East.

Tea is Sri Lanka's main foreign currency earner.

See also:

09 Oct 02 | Business
29 Aug 02 | Business
06 May 02 | Business
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