Financial Daily from THE HINDU group of publications
Monday, Mar 22, 2004
Agri-Biz & Commodities
Industry & Economy - Exports & Imports
Iraq orders: Are tea exporters ready?
Wellington (Nilgiris) , March 21
INCREASING offtake from Iraq in the New Year, in the wake of the third and fourth tranches of export orders, would appear to herald better times ahead for the tea industry.
Trade sources told Business Line that the tender for the third tranche of around 16,000 tonnes of tea for Iraq has been issued by the Iraq Ministry of Trade, the State Company for Food Handling. The fourth tranche or tender of around 20,000 tonnes has been issued by the World Food Programme (WFP), which is under the UN umbrella.
"Of the second tender of 4,000 tonnes floated earlier this month, a Delhi-based export house has been awarded the contract for supplying 3,200 tonnes of tea to Iraq. The deal was struck to supply 800 tonnes each of grades BOP1, BOP, FBOP and Pekoe. The remaining 800 tonnes has been awarded to Ceylon,'' informed sources said.
For the third and fourth tender, India will once again be competing with Sri Lanka, Vietnam and Indonesia, as the same tender has been floated to all these producing nations.
Sources said that in the first instance, delivery is to be made between June 1 and July 27. In the second instance, delivery is to be made between April 15 and June 15.
Iraq has once again sought a 5 per cent performance bond from each successful bidder. "A performance bond of five per cent of the contract value has to be given in writing by the sellers bank, within 48 hours from the date of award and prior to signing the contract. In effect, what it means is that the guarantor will have to cough up this amount if he is unable to fulfil his commitment,'' sources said.
However, this time around the tender includes a penalty clause of $0.20 per tonne per day, for any delay in shipment of goods.
Even as the industry appears to be warming up to Iraq orders, an element of unease has pervaded the optimism generated. For there is growing concern in the industry as to whether one would be able to meet demand. The trade is also unhappy over the fact that much ado is being made about using imported teas to cover export quantums.
"It is a bright year for the tea industry. However, with the orthodox quantities being offered at the South Indian auction centres (Coimbatore, Coonoor, Kochi) being as low as 1.5 lakh kg per week, will we be able to cover any stipulated quantity in time,'' question some merchant exporters.
Sources maintain that with the producer exporter preferring to export his teas directly, lesser volume of tea is coming into the auction centres.
"To cover one container of 1,000 tonnes it would take around 3-4 weeks in the current scenario. Many exporters are even scared to offer a quote, particularly in the light of the fact that they have to sign a performance bond to ensure their commitment. The ball is now in the producer's court. Are they geared up to meet demand?
It is now up to the producer to ensure sustained production of orthodox tea or else we will have no choice but to import tea,'' a leading merchant exporter said.
Tea exports to Iraq for January - October 2003, stood at 4.1 mkg, in sharp contrast to 39.7 mkg for the corresponding period in 2002.
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