If the present situation is any indication, the tea market is to remain firm till July, with the new season due to start shortly with an average price increase of 15 to 20 per cent over last year, higher for quality tea, according to Mr Aditya Khaitan, Managing Director of McLeod Russel India Ltd, the world's largest tea producing company with an annual production capacity of 100 million kg and. spread across India, Africa and Vietnam.

Talking to Business Line , Mr Khaitan gives reasons for his optimism. First, the demand is strong due to various factors such as last year's production shortfall of about 25 mkg and a pipeline shortage of over 60 mkg together with this year's normal consumption growth.

Second, the crop prospects so far this year look better. “There has been required rainfall in February and March both in Assam and Dooars and the demand for new season tea appears to be good,” he observes. “Last year, we lost crop in Assam due to excessive rainfall and pest attack and that too in May and June, the months of quality tea.”

The global market too, he feels, would remain firm. “Reports of dryness of African crop, which influences the market a great deal, are pouring in and the Sri Lankan crop too is reportedly on the lower side,” he says adding, “McLeod Russel will take full advantage of it.”

West Asia crisis

Last year, the company's normal exports of about 25/26 mkg from India suffered by four mkg due to crop loss. Hopefully, this would not happen this year. The turmoil in North African countries, as he points out, did not affect McLeod as exports to these countries are negligible. Libya is a low-quality tea market while Egypt consumes orthodox tea. The world needs an additional 55 to 60 mkg of black tea every year to meet the normal consumption growth.

The dryness in Africa, he concedes, will also impact company's production in Uganda and Rwanda but not as much as Kenya. McLeod does not have property in Kenya. The prospects of Vietnam production too appear to be low due to persistence of cold weather. “But it is too early to predict as the season is about to start.” McLeod's overseas capacity is close to 25 mkg.

The company's performance in 2010-11, he estimates, will be good. “We did not acquire any property in 2010-11 and therefore will be able to reduce our debt burden hopefully by about Rs 80 crore or so, Mr Khaitan added.

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