India Attacks Imperil Goal of Tripling Tea Exports to Pakistan

By Thomas Kutty Abraham

Dec. 4 (Bloomberg) -- India may miss its target of tripling tea exports to Pakistan, the world’s third-biggest buyer, as the terror attacks on Mumbai threaten trade between the two nations.

The country planned to boost sales to Pakistan to more than 20 million kilograms in the next three years, one-tenth of total output, from 5.47 million kilograms in 2007, Basudeb Banerjee, chairman of the state-run Tea Board of India, said from Kolkata. The target may not be met after India blamed “elements” within Pakistan for the assaults, he said.

Rising tensions with Pakistan may undermine India’s plan to diversify away from traditional markets including Russia, where demand for tea and other commodities has declined because of the credit crisis. India, the world’s biggest producer, sells about a quarter of its annual 800-million kilogram output overseas.

“We were hoping that Pakistan would buy more but with what has happened in Mumbai, it is a million dollar question,” said Aditya Khaitan, managing director of Mcleod Russel India Ltd., the nation’s biggest tea grower. “Seeing the way things are panning out, we feel it’s going to be much more difficult for trade between the two countries to happen.”

Ties between the two nations, which have fought three wars, started to improve in April 2003 and led to the restoration of diplomatic, sporting and transportation links. In October last year, cargo truck service was permitted along the Attari-Wagah border crossing, a move expected to boost trade.

Tea sales to Pakistan totaled 4.3 million kilograms in the January-July period, up 54 percent from a year ago, according to the most recent data from the Tea Board.

‘Key Market’

“Opening up the land border was seen as the biggest step to boost tea trade,” Tea Board’s Banerjee said. “We’ll continue to push to grow exports to Pakistan as it is a key market.”

Trade between the nuclear-armed neighbors was dented after they massed more than a million troops on their 1,800-mile border following an attack on the Indian parliament in 2001. Pakistan denied allegations by India that it had a role in the assault.

Tensions eased after the countries began withdrawing troops a year later.

Pakistan’s exports to India totaled $287.8 million in the year ended March 31, a fivefold increase from four years earlier, according to India’s trade ministry. Shipments from India jumped almost seven times to $1.94 billion in the period.

“If the tension keeps building up, trade, including tea imports, is certain to be affected,” said Mohammad Altaf Borra, former chairman and member of the executive committee of the Pakistan Tea Association.

African tea prices for most grades rose this week for the first time since Oct. 14 at the world’s largest auction in the Kenyan port city of Mombasa, Africa Tea Brokers Ltd. said. Top prices for 17 grades increased and three fell, while four were unchanged at the weekly sale, the broker said Dec. 2.

Mastermind

India has blamed the assaults, which began Nov. 26 and left 195 people dead, on a Pakistani group. It has asked its neighbor to extradite 20 people suspected of involvement in terrorism, including the alleged mastermind of the attacks.

Pakistani President Asif Ali Zardari denied his government was involved in the attack and said in an interview with CNN the gunmen were “stateless actors.”

India’s total tea shipments may still exceed 200 million kilograms this year because it expects to benefit from reduced supplies from Kenya and increased demand from Iraq, Tea Board’s Banerjee said. Exports were 156.7 million kilograms last year.

Russia cut purchases of tea by 20 percent in auctions from October, RIA Novosti reported last month, citing a grouping of tea-and-coffee producers. The country buys about 170,000 tons of tea a year, the news agency said.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net