The Hindu Business Line : Declining trend in tea output likely to continue

South Indian tea production in May dropped by seven million kg and the declining trend is expected to continue in June, July and even in August due to torrential rains and high velocity winds in the tea-growing areas in the region.

The total drop in output during May - August is expected to be around 12 million kg (mkg), according to plantation industry sources. Meanwhile, the fall in all India production is estimated to be around 15 mkg, they told Business Line. The all-India production during January - April 2006 was 154.4 mkg against 164.8 mkg in the corresponding period in 2005.

Impact on CTC prices

The deficiency in Kenyan production continued to remain at around 35 mkg. The production in May in Kenya was 106.3 mkg against 142.7 mkg in the same month in 2005. Even though the Kenyan output started falling from November last year and that seems to have continued till May, this phenomenon has neither reflected on Indian exports nor significantly on the prices. However, its impact was felt on the CTC prices, which improved marginally while that of orthodox dropped by Rs 4-5 compared to last year.

25% rise in prices likely

In fact, the crop in May - June last year was on the higher side and as a result, the prices declined in the second half of the year. Contrary to this, production has shown a downward trend this year. This factor coupled with the drop in output in Kenya is likely to push up the prices in the later part of 2006. "It is expected that the prices will increase by an estimated 25 per cent over the average price of 2004," they claimed.

Belying expectations that the decline in Kenyan production would push up Indian exports, shipments showed a decline. During January-March 2006, exports stood at 36.55 mkg valued at Rs 308.58 crore against 47.33 mkg valued at Rs 414.74 crore in the same period last year.

Lower unit value

The unit value realised was Rs 84.43 a kg this year against Rs 87.62 in January - March 2005.

However, industry sources claimed that following the visit of a delegation from Pakistan exports in the coming months were expected to improve. Besides, shipments to Iraq were also likely to move up, they said.

Mumbai-Karachi ferry

Shipments to Pakistan during 2005-06 stood at 10 mkg and exports during the current fiscal are expected to go up to about 12 mkg. However, the Union Commerce Ministry is reportedly targeting an export of 20 mkg.

The Ministry, they said, was keen to facilitate this and the opening of the Mumbai - Karachi ferry service has come as a positive step towards this direction.

Pakistan, which has a total tea market of 120 mkg, imports about 84 mkg from Kenya, that is, in fact, 25 per of the Kenyan production.

If Pakistan reduced its import duty for Indian teas to the level it has fixed for Sri Lanka and Bangladesh that could boost the exports, they claimed.

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

In a bid to increase the exports, the industry is exploring new markets such as Iran in the non-traditional areas. The loss of CIS markets is pointed out as the reason for the decline in the country's tea exports, they added.