Tea production in the current tea season (March to October) is expected to plunge due to uncontrolled growth of tea bushes and proliferation of weeds as the tea gardens remain shut during the countrywide Covid lockdown.

Though the Ministry of Home Affairs has exempted tea industry from the lockdown, State governments and district magistrates are yet to pass similar orders with proper restrictions.

This apart, tea estates have to deal with infestation of pests, with garden maintenance activities almost non-existent during the lockdown period.

Substantial efforts are needed to bring bushes back to a state conducive for growing and plucking.

First flush teas hit

Tea estates are expected to start production from the third week of April and production may fall drastically as only 50 per cent of workers would be allowed in the gardens, said rating agency ICRA.

Kaushik Das, Head-Corporate Sector Ratings, ICRA, said about 7 per cent of the annual production, primarily of the first flush variety in North India and 6 per cent in South India, are likely to get impacted this year.

Consequently, production from the organised segment is estimated to decline by 45-50 million kg, he said. A similar impact on the small tea growers’ segment would result in a further decline of 45 million kg.

Tea is a fixed cost-intensive industry, with the cost of labour accounting for 65 to 70 per cent of the total cost of production.

ICRA expects tea estates to reduce use of temporary workers for plucking during low production period.

The impact of fall in production is estimated to increase the cost by nearly ₹15 per kg, assuming that normal production returns by second flush teas.

Price dynamics

With the first flush of tea gone, it is imperative that production of the second flush teas in North India is close to normal.

Production of the second flush, which starts in May, is usually the best quality for North India players, except in Darjeeling, where the first flush is most premium quality.

For tea companies already reeling under high costs and stagnant realisations, any material decline in production of the second flush teas would lead to further hardships, unless prices increase, said Das.

While sharp decline in production should result in a sizeable increase in prices, it remains uncertain as the demand trend in export and domestic market would determine tea prices.

In addition, a substantial carry-over stock of 60 million kg in the domestic market from the previous season is expected to put pressure on prices.