Assam Tea Shipments to Iran Hinge on Rupee Payment Mechanism

Assam’s tea exporters, who have been servicing the important Iran market for long, are relying on the Union government’s informal assurance that there will be no disruption in receipt of payments for their shipments because of the US sanctions on Iran and unambiguous stipulation that India stop oil imports from Iran.

With the sanctions and stipulation already in effect after the expiry of the fixed period waiver by the US in the case of India, Assam’s exporters of high quality and premium orthodox tea, which is much sought-after by Iran, were apprehensive that payments may not be forthcoming, which would upset their manufacturing schedule. Iran buys a total of 30-31 million kg of Assam tea, of which, as much as 25 million kg or so is thin liquor orthodox variety and the rest is strong liquor CTC (crush, tear and curl) variety.

When the US sanctions were looming, India and Iran, foreseeing difficulties in making payments for commodities, decided to have in place a rupee payment mechanism, which is being operated by India’s UCO Bank. As per the mechanism, India deposits payments in rupees to Iran’s account for the oil purchased and uses the paid amount to clear the dues of Indian exporters shipping out a host of goods, including tea, to Iran.

When exporters expressed their apprehensions about the rupee payment mechanism, senior officials in the Commerce Ministry assured them that adequate rupee reserves were available and, therefore, they should go ahead with their manufacturing and shipment schedules.

The exporters reckon that after the recently held Lok Sabha elections, priority to Assam has risen a few notches as far as the Centre is concerned. After the state had, for the first time, a Bharatiya Janata Party-led government in 2016, the recent Lok Sabha elections saw the BJP increase its tally to nine MPs from seven in 2014. Assam has a total of 14 Lok Sabha seats. In the past two-three years, the BJP has been nursing a strong desire to make a marked presence in the Northeast. It has succeeded to a large extent in realising its ambition with the help of regional allies. Now, out of 25 Lok Sabha seats in the entire Northeast, the BJP and allies account for 18 seats.

In recognition of the party’s growing presence in Assam and the Northeast, Prime Minister Narendra Modi and BJP president Amit Shah also decided to have two representatives from the region in the Council of Ministers. In addition to Kiren Rijiju of Arunachal Pradesh, Rameswar Teli, who won the Dibrugarh Lok Sabha seat defeating Congress heavyweight Pawan Singh Ghatwar, is now Minister of State for Food Processing Industries. Teli represents the Assam tea community and is said to have a strong connect with the people.

Finally, there is Himanta Biswa Sarma, who, with his organisational skills, has already become a favourite of the central BJP leadership. Moreover, the former Congressman who switched over to BJP, holds the finance portfolio in the Assam Ministry. The central BJP top brass and the Modi-led government are aware that the tea industry is the pivot of Assam’s economy, and therefore, the urgency of addressing the industry’s concerns has been recognised. While the tea export industry feels that the issue has already received New Delhi’s attention, the payment mechanism with Iran holds the key to the future of its export business.

 The writer is a senior journalist based in Kolkata, who used to work earlier with Hindu Business Line and Economic Times.

Also read: Sanctions on Importing Iranian Oil will be a Disaster for India