Tea import scandal rocks Iran

Tea import scandal rocks Iran
Despite placing orders for Indian grade 1 tea, the company allegedly imported Kenyan grade 2 tea. / bne IntelliNews
By bne IntelIiNews December 4, 2023

The General Inspection Organisation of Iran has exposed a massive corruption case involving imported machinery and tea that benefited from preferential currency rates meant for essential goods, Etemad newspaper reported on December 3.

According to the inspection organisation's findings, an influential group operating in the tea sector has imported machinery and tea worth over $2.7bn with subsidised exchange rates from 2019 to 2022. A substantial portion of this amount has allegedly been misappropriated by one particular group of importers.

Until last year, the Iranian government would allocate foreign currencies at rates considerably cheaper than market prices for the import of essential commodities such as wheat, barley, rice and tea to keep the prices of these goods in check on local markets. The practice stopped in May 2022, leading to increasing prices that continue to date, forcing many families under the poverty line.

While the inspection organisation did not explicitly name the entity involved, investigative reports identify the culprit as the Debsh Cultivation and Industry Group, recognised by its trade brand Debsh Tea.

The primary modus operandi of the family-owned business revolves around securing tea estates in African nations through futures contracts, subsequently importing the produced tea to Iran.

The investigations reportedly indicate a stark discrepancy in the tea grades ordered and received by the Debsh Group. Despite placing orders for Indian grade 1 tea, the company allegedly imported Kenyan grade 2 tea.

The price difference between these two grades is a staggering $12 per kilogramme, resulting in astronomical profits for the company's executives due to the high import volumes. It has been reported that the Debsh Group imported tea at a mere $2 per kg but sold it domestically at around $14.

What adds a layer of complexity to this case is the seemingly coordinated approval from various regulatory bodies. The Standard Organisation, Customs, and ministries such as Agriculture Jihad and the Food and Drug Administration all reportedly greenlit the quality of the imported tea.

Highlighting the systemic nature of the corruption, the Inspection Organisation's head stated: "The clearance process in customs for this group's goods was primarily through the 'green' route, implying minimal scrutiny, despite the need for quality assurance through other channels."

Inspection Centre Mahmoud Khodayian also addressed the imports of related machinery for this trade group: "In addition to the currencies provided for tea imports, over $1.472bn were allocated for importing related machinery for this group from 2019 to 2022, adding to the company's overall obligations, which will expire upon the legal deadline."

The scandal continues to grow, with politicians now getting involved in the debate. Jalal Rashidi Koochi, a parliamentary representative, wrote in local media Entekhab that the central bank has nearly $4bn in foreign currency for importing low-quality tea, which has only led to dissatisfaction and corruption, but it doesn't have funds for car imports, which the public desires and which would have positive economic and social impacts for the country.