Tea crisis looms as prices surge ahead of Ramazan

Published February 12, 2023
IMPORTERS seek early steps for the release of containers stuck at ports to check sharp hikes in tea prices amid tight supplies and high demand.—White Star/file
IMPORTERS seek early steps for the release of containers stuck at ports to check sharp hikes in tea prices amid tight supplies and high demand.—White Star/file

KARACHI: Ahead of Ramazan the price of black tea (loose) has swelled to Rs1,600 per kg from Rs1,100 in the last 15 days as around 250 containers still stuck at the port that arrived from late December 2022 to early January.

After Jan 21, banks had filed financial instruments thus allowing only those importers to pay duties who received 180 days defer payment telex from their suppliers. But the containers of those who failed to get this facility from their suppliers are still stranded at the port.

A retailer said a leading brand has raised the price of 170-gram Danedar and Elaichi packs to Rs320 and Rs350 from Rs290. The 900 and 420-gram packs now cost Rs1,480 and Rs720 as against Rs1,350 and Rs550. Other packers are set to follow suit.

Zeeshan Maqsood, Convener Standing Committee of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Tea, said that imports are currently under crisis which may lead to huge shortages in March.

He said banks say they have instructions from the State Bank of Pakistan (SBP) to release documents on 180-day defer contracts or 180-day letters of credit (LCs).

He added that the situation is getting worse because if anyone gets these containers released on 180-day defer payment then how he would calculate the cost of imported tea as nobody knows what would be the dollar rate after six months on the interbank market?

Mr Zeeshan, who is also an executive member of the Pakistan Tea Association (PTA), said the banks are not opening LCs saying they do not have any instructions from the SBP for new contracts.

He feared that tea price may hit Rs2,500 per kg in Ramazan in case stuck-up consignments were not released.

As a result, the welfare associations may not be able to distribute tea in ration bags due to shortage and high cost, he added.

Mr Zeeshan suggested that Pakistan should sign a Prefrential Trade Agreement (PTA) with Kenya. “We import 90 per cent of Kenyan tea from a weekly auction in Mombasa where all African Origin teas are sold.”

Kenya is the gateway to Africa connecting seven landlocked countries. Pakistan imports teas worth around $500m annually from Kenya and exports only $250m of different items.

“If PTA is signed with Kenya then Pakistan exports will increase to over $2.5bn annually through shipments of items like rice, surgical goods, textiles, tractors, electronics, IT, cement and many other items which Kenya imports from other countries.

PTA would also help in bringing down tea prices and mutual dialogue can be started between the two countries to boost trade in other currencies for mutual interest, he hoped.

The country’s official tea imports in IHFH23 stood at 128,057 tonnes ($318m) versus 129,693 tonnes ($300m) in the same period last year. The average per tonne price in IHFY23 stood at $2,489 as compared to $2,317, official data showed.

Published in Dawn, February 12th, 2023

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Tough talks
Updated 16 Apr, 2024

Tough talks

The key to unlocking fresh IMF funds lies in convincing the lender that Pakistan is now ready to undertake real reforms.
Caught unawares
Updated 16 Apr, 2024

Caught unawares

The government must prioritise the upgrading of infrastructure to withstand extreme weather.
Going off track
16 Apr, 2024

Going off track

LIKE many other state-owned enterprises in the country, Pakistan Railways is unable to deliver, while haemorrhaging...
Iran’s counterstrike
Updated 15 Apr, 2024

Iran’s counterstrike

Israel, by attacking Iran’s diplomatic facilities and violating Syrian airspace, is largely responsible for this dangerous situation.
Opposition alliance
15 Apr, 2024

Opposition alliance

AFTER the customary Ramazan interlude, political activity has resumed as usual. A ‘grand’ opposition alliance ...
On the margins
15 Apr, 2024

On the margins

IT appears that we are bent upon taking the majoritarian path. Thus, the promise of respect and equality for the...