The Hindu Business Line : Indian tea to gain on rising Kenyan prices

Latest trend
Average realisation in South India declined 6.5 pc during January compared with same period a year ago. Though prices improved in February, they have fallen thereafter.
Prices in 2005 average Rs 42.69 a kg against Rs 47.03 in 2004.

Kochi , March 30

The upward price trend in Kenyan tea auctions following drop in its production, which according to latest information is 52 million kg, would pave the way for an increase in export of Indian teas to Pakistan and Egypt.

Kenya exports 25 per cent of its teas i.e., 84 million kg (mkg) to Pakistan, which has a total market of 120 mkg.

Indian exports to Pakistan during January-November 2005 were at 5.85 mkg and it is likely to touch 7.5 mkgthis year, trade sources told Business Line.

The rise in Kenyan tea prices would place Indian tea at an advantageous position, they said. Pakistan's duty levels are around 25 per cent for Indian and Kenyan teas. However, it is lower at 17 per cent for Sri Lanka and Bangladesh, who are exempted from customs duty, the other components being, infrastructure duty, VAT and withholding tax, they said.

Fillip through road

Indian exports to Pakistan are still through the sea route and opening up of the road-route would be a further fillip, they pointed out.

Kenya supplies almost the entire annual requirement of 85 mkg of Egypt, as part of the COMESA, which gives nil duty benefit for African producers. South India lost out on account of this, exporters said.

However, last year when the Egypt entered the trade to supply subsidised teas, South Indian teas found their way to Egypt via Mombassa blended with Kenyan teas. Even now, there were large Government orders pending with some traders in Mombassa who had been caught unawares by the spurt in Kenyan prices and were looking at South Indian teas to reduce cost, they said. Now Egypt has reduced duty for Indian tea to five per cent from the earlier 30 per cent. There is a potential to export 7-8 mkg directly to Egypt, in addition to the shipments via Mombassa, they claimed.

Global output low

Meanwhile, the current year world production is reported to be lower by 15.5 mkg for January 2006. Important producing countries that had reported lower crop include Kenya (down by 16.2 mkg) and Sri Lanka (down by 1.2 mkg).

The Kenyan crop was initially estimated to be lower by 25 per cent amounting to 82 mkg. However, the latest information indicated that shortfall in production would be around 16 per cent or 52 m.kg, sources said.

There were some improvement in the prices in February, but it was rather short lived. From January, prices picked up and peaked at Rs 60 a kg levels by February-end. However, there was sustained drop thereafter until the last few weeks and currently it is ruling at Rs 53 at Kochi. According to the market sources, the Indian prices could be 25-30 per cent higher than that of last year's levels and that might sustain throughout the year.