Global shortfall in tea production is expected to help Indian tea this year after a disappointing performance in 2017.
Global shortfall in tea production is expected to help Indian tea this year after a disappointing performance in 2017. Robust domestic demand and higher exports is estimated to help in price recovery this year after auction prices saw marginal decline due to a variety of factors including a change in tax regime, traders said. India is the second largest producer of tea in the world and makes up 26% of the global tea production. “Tea had a bad time last year when we saw the prices going down post-GST. Given the lower global production we expect 2018 to be positive,” R Sanjith, commodities head, United Planters’ Association of Southern India (UPASI), told FE. The auction prices for 2017 up to November stands at an average of Rs 132.80 per kg across India as compared to Rs 134.42 per kg in the comparable period of 2016. South Indian tea prices till November stand at Rs 96.91 per kg as against Rs 103.35 per kg in 2016. For North India, the average auction price for the eleven months of 2017 stands at Rs 143.97 per kg as compared to Rs 144.73 per kg in 2016. Sriram Narayanaswamy, president, Global Tea Brokers, said lower production in Kenya is likely to help South Indian CTC tea, while the quality problems faced by neighbouring Sri Lanka would help in better demand for orthodox tea. Russia placed temporary restrictions on imports of tea and all other agricultural products from Sri Lanka after a beetle was found in a consignment.
“The outlook is good but the issues tea exporters are facing post-GST should be addressed. It is reported that exporters have to get nearly Rs 100 crore in refund and it is getting delayed. There is good demand and 2018 is expected to be better, especially for south Indian tea which is getting good enquiry for orthodox tea,” he added. However, Parimal Shah, vice president, M K Jokai Agri Plantations, expressed concern that the impending wage hike in North India could cause further problems for the tea industry which provides permanent employment to 1.5 million people and indirect employment to another 5 million people. “Labour overheads account for 50% of the cost of production for any plantation. Already the cost of production for the plantations has increased by 40% in the past three years on account of rise in wages and other inputs.
If this cost is further increased, it shall become quite impossible for any tea plantation to break-even, because the rising costs will not be compensated by an equivalent increase in prices mainly on account of the cheaper quality bought-leaf factory produced teas flooding the market,” he said. He added that ad-hoc cost rises can lead to seriously negative implications for the already struggling tea industry such as plantation lock-downs and mass unemployment. Indian tea production for the first eleven months of 2017 stands at 1,208.77 million kg as against 1,203.36 million kg in the same period of 2016. However, the global production for the period saw a marginal decline to 2,012.73 million kg from 2,042.19 million kg in 2016.