Industry experts are pegging the shortfall in pipeline stocks to expand to a record 70-75 million kg this year as against 25 million kg last year.
This year, production shortage is expected to be around 20-25 million kg, but domestic demand is increasing by 30-35 million kg every year, this will add up to a pipeline shortage of 70-75 million kg.
For the first time I am seeing a huge shortage in the pipeline stock, said Aditya Khaitan, MD, McLeod Russel, and chairman of the Indian Tea Association.
While consumption is growing in India, production is getting limited because of the weather. Moreover, many tea gardens are replanting, thus limiting production, he said.
Tea production in India was down by 12.1 million kg till May 2009, producing 85.3 million kg against 97.4 million kg for the corresponding period last year.
A closer look at the Indian tea scenario shows that surplus pipeline stock of tea started depleting gradually from 2003. While the pipeline stock increased from 53 million kg in 2000 to 67 million kg in 2003, it came down to 26 million kg in 2006.
Already there is good demand from packeteers and this is likely to continue throughout the year, said Gopal Poddar, chairman of the Calcutta Tea Traders Association.
While exports can be reduced to make up for the shortfall, industry experts feel that it wont help as prices at the international market is much higher.
People will continue exporting tea to get better realization, said Khaitan. The average export price during the first five months has gone up to Rs 129.11 against Rs 98.73 for the corresponding period last year.
Insiders feel domestic prices are likely to go up after October-November as stocks will start depleting fast with production in north India already taking a huge hit.
The shortage of pipeline will be there during winter. Prices may go up at that time, said Khaitan.
According to Poddar, prices of Assam tea has already touched Rs 125-160 per kg now and will only go up. It might even go up to Rs 180-190 per kg, he said.