That hot cuppa chai will singe your pocket

That hot cuppa tea will leave you fuming as the beverage’s prices are set to remain high with the drop in Assam’s production.

Production of the first flush crop is estimated to be lower by 25-35 per cent this month in Assam compared with the 32.19 million kg produced in March 2019 due to drought-like conditions in major tea-growing regions of the State.

Last year, too, production had declined on the back of Covid-induced lockdown. This resulted in tea prices touching almost ₹300 a kg at Guwahati in the last week of August and ₹200 in the first week of September at Coonoor last year.

The drop in tea production in Assam, which makes up 49 per cent of the country’s total production, has resulted in the average price at the Kochi, Coonoor and Coimbatore auctions ruling higher by ₹40-50 a kg for the week-ended March 20 compared with the same period a year ago.

According to industry insiders, the decline in production in March coupled with very little or no carryover stock from last year is likely to keep tea prices firm this year.

Last year, tea production dropped 10 per cent to 1.25 billion kg from 1.39 billion kg in 2019 with the output in Assam dropping 15 per cent to 618 million kg.

“While teas have not yet started coming to auctions, the private sale is looking better and we expect prices to hold firm as there is a shortage in the system. So demand-supply wise, it should be better,” Vikram Singh Gulia, Managing Director and Chief Executive Officer, Amalgamated Plantations Private Ltd (APPL), told BusinessLine .

“Sufficient quantity is not available yet for auctions in the North. Private trade is taking place at higher rates, though artificial. But prices are still lower than what we witnessed during January-February this year,” said Sriram Narayanswamy, President of Coonoor-based auction firm Global Tea Brokers.

Gain for tea companies

The firming up of prices augurs well for tea companies, which have been reeling under the pressure of increasing costs. According to insiders, the organised sector would gain since it would have no problem in increasing the output from the second flush due around May.

Insiders pointed to how during November-December last year Assam witnessed record tea production as every “bush was ripped off”. Last year, tea production picked up from September onwards, resulting in some correction in the prices at the auctions across the country.

“Prices are likely to remain firm at least during the first half of the next fiscal and this would augur well for tea companies. But from October, it will depend on how the prices move,” Kaushik Das, Vice-President and Sector Head, Corporate Sector Ratings, ICRA, said.

Lower crop

The tea industry in Assam, which includes the big gardens and the small tea growers, produced close to 32.91 milion kg (mkg) of tea in March 2019, according to data available on Tea Board of India website. Production of first flush crop in Assam was down by nearly 64 per cent in March 2020 at 11.97 mkg as the plucking activities had come to a standstill between March 25 and April 13, 2020 on account of the countrywide lockdown due to Covid-19 pandemic.

According to Vivek Goenka, Chairman, Indian Tea Association, while the estates in North Bank of Assam are slightly better off, those in the South Bank, particularly Tinsukia, Dibrugarh and downwards have had virtually no rain during the month. This has impacted the production.

“Crop seems to be very different in different areas. Since the South Bank has had virtually no rains, hence crops are much lower. I am comparing to 2019 figures since last year was an abnormal year as the estates had to shut down in March due to Covid,” he said.

It is to be noted that North India, which includes the gardens in Assam and West Bengal, together account for over 80 per cent of the country’s total production. Hence any drop in production in the region adversely affects the supply of tea in the system.

Interim wage hike

The ITA has hiked the minimum wage of workers by an interim amount of ₹26 a day following the Gauhati High Court putting the onus of wage increase on tea plantation owners. The interim wage hike will be with effect from February 22.

ITA and a host of 17 tea companies had filed a petition against the February 23 notification of the Assam government enhancing the minimum wage by an interim amount of ₹50 a day to ₹217 a day. The next date of hearing is on April 26.

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