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M.R. Subramani

Chennai, Dec. 4 Despite Pakistan being blamed for last week’s terrorist attack in Mumbai that claimed nearly 200 lives, the tea industry sees better demand for the beverage from the country.

“We have witnessed more enquiries from Pakistan, especially from buyers in Karachi. Though significant purchases have not been witnessed at the auctions, we expect a pick up,” auction sources said.

A Chennai-based exporter said Karachi buyers had turned active during the past one week.

“We are seeing a rise in demand from all destinations, including Pakistan. One of the main reasons for this is the crash in prices,” the exporter said.

Prices at the auctions have crashed to Rs 50 a kg from Rs 75 three weeks ago. “Prices have crashed in Kenya by 75 cents or Rs 30 a kg last week. Once global tea prices fall to $1 a kg, we could see a surge in demand,” the auction sources said.

“Some of the buyers had been delaying their purchases for quite some time. This is because the prices were high and they had been expecting a fall,” the sources said.

“Now that the prices have fallen and almost bottomed out, we could see them coming to the market,” they said.

Analysts say that with the Pakistan President, Mr Asif Ali Zardari, and his Government keen on good relations with India, there could be efforts to improve trade between both the nations.

“Surely, Pakistan could be going all out to show that it is interested in improving relations with India. Therefore, we could see a renewed demand for Indian commodities such as tea,” they say, pointing out to last week’s statement by Pakistani officials in Chandigarh that they plan to increase tea purchases from India.

“The World Bank has approved a new loan package for Pakistan. That will arm our neighbouring nation with better purchasing power and it will also result in better tea offtake,” they said.

On the other hand, Indian exporters would be pressured to price their produce competitively since Kenya’s production has increased.

“In October alone, its production increased three million kg (mkg) compared with the same period a year ago. The price crash has also left Sri Lanka offering orthodox teas as competitive prices,” the sources said.

Tea production in Kenya was down by over 35 mkg during January-September and it was one of the reasons for tea prices to surge this year.

Kenya’s production was affected by dry weather last year-end and political feud leading to many gardens being damaged.

Indian production increased 17.4 mkg during the period but it witnessed a 6.2 mkg drop during September as rains affected production in North India.

During September, tea prices in the country had topped Rs 100 kg even for CTC (crushed tear curl) dust teas.

However, a slump in commodity prices since October has led to the rates dropping sharply. Despite lower offerings at the auctions, prices have not shown any significant rise.

The Chennai-based exporter said prices could turn steady once winter demand picks up around the end of this month.

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