The Hindu Business Line : ITA sees turnaround in tea sector's fortunes

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ITA sees turnaround in tea sector's fortunes

Our Bureau

However, H1 production down by 10 mkg

Kolkata , Aug. 29

After seven years of recession, the Indian Tea Association (ITA) hopes to regain the growth momentum, which it enjoyed in the mid-nineties.

According to the Status Paper 2006 published by the ITA, production this year has been pegged at 930 million kg, consumption at 805 mkg, imports at 20 mkg and exports at 195 mkg.

In 2005, production was 928 mkg, consumption was 780 mkg, imports 16 mkg and exports 192 mkg. The year ended with a surplus of 23 mkg.

Optimistic

However, in the first half of the current year, tea production is down by 10 mkg because of unfavourable weather conditions. The report, however, is optimistic about an industry turnaround.

"If the current trend continues the industry should perform well and resume its growth momentum after seven years of recession", the report has stated.

ITA felt that 2006 would end with a shortfall of 27 mkg. As a result, "the year 2007 will start on a finer note with lower crop in the pipeline".

The report observes that to meet the shortfall and the "burgeoning" domestic demand, the industry would have to produce quality tea at a reduced cost, increase productivity and manufacture more orthodox teas.

ITA feels that domestic consumption would continue to grow at 3.3 per cent per annum and this would gain importance because exports are unlikely to cross the 200 mkg-mark in the short term.

Exports, imports

Exports in the first six months of 2006 are down by 1.5 mkg compared to 2005 but exporters are optimistic that "this trend could be arrested" as soon as the second flush reaches the market. However, South Indian tea exports have registered a growth during the first half of 2006.

Price reversal

After years of falling prices, ITA is hopeful of a price reversal in the current year. From an average tea price of Rs 64.55 per kg in 2004 it has dropped to Rs 58.06 per kg in 2005. In 2006, all auction centres across the globe have registered growth.

The industry has accepted that imports cannot be banned. It has also realised that there are certain markets for blended teas. Hence, most of the teas imported are blended with Indian varieties and re-exported.

The Union Government has already fixed eligibility criteria for tea imports and the industry expects that this would be followed strictly. Moreover 50 per cent value addition has been made mandatory.

"A close scrutiny of the macro level statistics suggests that stocks in the pipeline since the beginning of 2006 have been declining and if the crop scenario does not improve there will be further hardening of prices towards the end of 2006 and India will be no exception", the report suggests.

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