Agri Business

N. Indian tea prices to jump on lower crop outlook

Santanu Sanyal Kolkata | Updated on October 02, 2012

Women carrying tea leaves from a tea garden on a rainy day on the outskirts of Guwahati. Photo: Ritu Raj Konwar

C.S. Bedi

The North Indian tea prices are set for a jump, according to producing companies.

This, it is felt, will happen due to the crop loss caused by heavy rains in large parts of Assam in September. Many tea growing areas, particularly in Upper Assam, are virtually submerged. Upper Assam accounts for an estimated 60 per cent of total tea production in the State which again accounts for more than 50 per cent of the country’s total tea production and around 70 per cent of the total North Indian production.

C.S. Bedi, Chairman, Indian Tea Association, when contacted, could not estimate the probable rise in prices. “It is difficult to say anything firmly at this stage,” Bedi told Business Line. “The impact of the supply crunch will be felt in coming months. It is not happening right now. In fact, the tea prices in last two auctions, though higher than last year, showed a decline.”

However, in Upper Assam, as he estimated, the crop loss for September as a whole would be around 20 per cent. If only second half of the month was taken into account, the loss would be much higher, around 30 per cent, he said. In September 2011, Assam Valley (excluding Barak Valley, i.e. Cachar region) produced 93 million kgs. This figure this year will be down by about 18 to 20 million kgs, it was felt.

As it is, the country’s total tea production so far this year has been at a low ebb. Till July, the cumulative shortfall, according to the Tea Board, was 20 million kgs, though industry would put the figure higher at around 30 mkgs.

In North India, the production was hit first, by scanty rainfall which, coupled with usual limited availability of tea at the beginning of the season, pushed up prices by Rs 30 to 35 per kg over the previous year and now by excessive rain. In September alone, the South Indian crop was down three million kgs again due to insufficient rain.

“In North India, the weather has been playing truant since October last year”, observe tea industry sources pointing out that the situation improved a bit in June only to take a turn for the worse in July. Right now the price is up on an average by about Rs 25 per kg over the same period the previous year.

The best tea producing months in North India, July to October, have taken a hit and henceforth, the production will gradually taper off with the season coming to a close from January. Therefore, there is no way the crop being lost during these months can be recovered in next couple of months, add the sources.

No cheer

Interestingly, the projected rise in price brings no cheer to the growers. This is because the rise in cost has been a concern. “The probable gain from projected price rise will be offset by the increase in costs,” the ITA Chairman said.

He pointed out that the cost of coal has gone up three times as much in past few years, the price of fertiliser (Murate of Potash) from Rs 6,500 to Rs 15,000 a tonne in addition to the recent diesel price hike adding to the transportation cost and wage increases.

“In a high cost situation we stand to gain from price rise only if the volume is large which unfortunately is not the case now," he observed.

Published on October 02, 2012

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