Tea prices to go up by Rs 40/kg on shortages

Written by Commodities Bureau | Mumbai | Updated: May 15 2009, 08:05am hrs
Tea auction
Tea will become costlier by Rs 15-20 a kg for the retail consumer from this week. Leading tea companies and retailers have decided to raise the retail prices of tea in two phases, by Rs 15-20 from May 15, to be rounded off with a similar hike in June. This means, tea will be costlier by Rs 30-40 a kg, depending quality, in a space of roughly 40 days.

Such a steep hike in tea prices is attributed to a domestic short supply from poor rains in tea growing areas, coming on the back of a global shortage triggered by crop failures in Kenya and Sri Lanka.

Prices of green tea leaves have gone up sharply. At the auction centres, prices have already increased by 30% during the current year but local traders have not increased their local prices. Now, we will have no option but to increase prices, Harendra Shah, chairman, Federation of All-India Tea Traders Association.

Average price rise at the auction centres this time is 80 to 90% compared with the price in 2006-07. During 2008-09, the average price rise was 55 to 60% at the auction centres but the consumer price rise was only 25 to 30%, he said.

The rise in tea prices would follow that of sugar prices in the retail. Prices of lose sugar have gone up by Rs 4 at Rs 26-27 per kg in the major metros in the past three months.

Sugar prices at the wholesale levels are likely to remain firm in the short run as the supply shortage due to a drop in sugar output in India would be overshadowed by the reports of rising imports. The talks that the sugar prices may be higher in the coming season, at the Rs 27-28 a kg level, could further lessen the sweetness of the morning cuppa.

Nevertheless, tea will remain the cheapest beverage for the common man compared with coffee and soft drinks. Per capita consumption of tea in the country has increased from 630 gm to 680-720 grams in recent years. To buttress this point, Suman Seth, president of Bombay Tea Traders Association, said that even at a tea price of Rs 300 a kg, a cup of tea would cost only Rs 1.80, the break-down being 60 paise for 2 gm of tea, 20 paise for sugar and Re 1 for milk.