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M.R. Subramani

CHENNAI, May 10

THE Indo-Russian memorandum of understanding (MoU) on tea trade has run into rough weather again. While Russia had not bought the assured 100 million kg (mkg) last year, this year too it has not followed the pact in letter and spirit.

"Russia bought only 79 mkg in 2001. This year, too, there has not been any significant purchase by them. The MoU is not being implemented since Moscow is not legally bound by it," trade sources told Business Line.

The MoU was initially signed in 1998 but was shelved after little improvement in tea offtake by Russia. The pact was revived again in December 2000 and, as per this, Russian agencies— Roschai (Russian Association of Tea Producers) and Russian Tea and Coffee Association - were to make efforts to buy 100 million kg of tea annually until 2005. The purchase would be under the rupee-rouble debt repayment route.

The MoU also had provisions for Russia to place purchase orders for 50 mkg during the first quarter of each year. According to Commerce Ministry sources, under the MoU, the tea buying agencies of Russia will only identify their needs and then place orders with India to buy tea. The MoU is seen as a sort of mutual contract.

"There are various reasons for Russia not meeting its needs from India. Currently, it is buying from various origins such as Sri Lanka, Vietnam and Indonesia and blending them. Duty differential is also playing a role," the sources said.

The lower offtake by Russia comes as no surprise since the Tea Board had expected Moscow to buy only 80 mkg, while Russian authorities on their part had pegged the figure at 70 mkg during their visit to the country in July last year.

Russia and other Commonwealth of Independent States (CIS) countries have been the major buyers of Indian tea but ever since the breakup of the Soviet Union, the purchase has been declining.

From nearly 175 mkg in the early 1990s, the exports dwindled to 95.9 mkg in 2000 and declining last year.

However, the Tea Board and the trade are leaving no stone unturned to increase exports to Russia and other CIS countries.

"A delegation is scheduled to visit Russia next month. We are determined to ensure improved cooperation in Indo-Russian trade," the sources said.

Plantation industry sources said Russia was one of the focus countries for export in the report prepared by Accenture and a task force to promote exports would be set up in a month or two.

"The Tea Board has set up a committee to look into the Accenture report and two-three sittings have already been held. Another sitting is likely to be held before the task force is set up for exports," the industry sources said.

Tea exports improved in March by 5.1 mkg to 18.9 mkg as compared to last year but the industry is cautiously optimistic. "It is too early to be upbeat about the exports. We don't think we will make up considerably on the export front, especially since the unit vale realisation has been declining. Even at the auctions, the returns fetched are lower by as much as Rs 15 a kg," they said.

For the January-March period, exports are up 2.3 mkg at 41.3 mkg as against the same period a year ago.

During the same period, prices at the auctions have declined by Rs 18.75 a kg to Rs 47.58. At the same time, production has declined by 6.4 mkg to 69.3 mkg.

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