With the rupee appreciating, tea exports may get hit this year, according to industry insiders and experts. While there is demand of tea in the international market, a stronger rupee is likely to eat up the benefits.
Export prices of tea in some countries dropped significantly during January-May period last year from the 2009 levels. Per kg tea price for export to the Netherlands dropped to Rs 190.14 per kg in January-May period last year from Rs 223.64 per kg level for the corresponding period in 2009.
The difference was the most in case of exports to Turkey where tea export prices came down by Rs 140 per kg to Rs 430 per kg during Jan-May 2010. Indian exporters did not feel much of pinch as the country imported a very small amount during the period last year.
It came down marginally,by a rupee almost , in Germany to Rs 200.53 per kg last year. Export prices in Canada slid to Rs 168.91 per kg against Rs 193.55 per kg in the corresponding period in 2009.
?One of the main reasons for realisation per kg being down was stronger rupee. Last year rupee was stronger against both euro and dollar,? said C S Bedi, chairman, Indian Tea Association.
The rupee gained 4.2%, from Rs 46.76 to Rs 44.75, during 2010, owing mainly to heavy FII inflows into Indian markets.
?The exporters are feeling the pinch this year too as the rupee is on an appreciative mode. While there is always the option of increasing prices, importers are not always agreeable to that. Otherwise they will ask for a price correction when rupee is weak,? Bedi said.
Azam Monem, director of McLeod Russel, said exports will become competitive if the rupee weakens during the year. ?African crop may not do well this year as there is already a dry spell in the country. That in turn will increase demand of CTC tea in the international market,? he said.
According to him, while tea export was slow in the first half of 2010, it picked up later on. ?Overseas buyers could not match domestic prices initially during the first few months of the year. But they may match prices this year as the demand is already high,? he added.
Industry insiders feel that while rise in oil prices will result in a depreciating pressure on the Indian rupee, India has been, on the other hand, able to attract strong capital inflows due to the high growth differential story.
According to Naveen Mathur, associate director, commodities and currencies of Angel Broking, the rupee has been behaving in an appreciating mode although there has been pressure on the rupee due to the market downturn in the last couple of days.
?Moreover, interest rates are likely to rise and if the interest rate differential between India and the western countries would enhance flow of foreign money into the country,? he said. ?Rupee was at Rs 45-47 range last year and it is at Rs 43-44 range this year. Some people are talking of the lower range coming down to even Rs 42, but overall it seems that the volatility will continue beyond March this year and exporters will definitely get hit then,? Mathur added.