Commodities

Darjeeling tea turns tepid as quality, output weigh

Shobha Roy Kolkata | Updated on July 18, 2019 Published on July 18, 2019

The country produces around 8-8.5 million kg of Darjeeling tea across 87 estates each year   -  Bloomberg

Prices have dropped by a third from last year; weak overseas demand also a factor

Higher production coupled with poor demand from overseas markets has weighed heavily on Darjeeling tea prices this year. Prices are down by nearly 32 per cent this year from the same period last year, with industry insiders also blaming a drop in quality of produce for the poor prices.

Darjeeling tea was fetching around ₹402.75 a kg at Sale 29 this week, nearly 32 per cent down from ₹593.84 last year. Volume0wise, around 56,088 kg of tea was sold in Sale 29 this year, almost 58 per cent more than 35,446 kg sold last year, said J Kalyan Sundaram, secretary general, CTTA.

Darjeeling tea output

The country produces around 8-8.5 million kg (mkg) of Darjeeling tea across 87 estates each year. Nearly 50 per cent of the Darjeeling tea, which is protected by the GI (geographical indication) tag, is exported. Only around 25 per cent of the total produce or close to 2 mkg of tea finds its way into auctions, while a good amount of tea goes into private sales.

According to Binod Mohan, Chairman, Darjeeling Tea Association, the near four-month-long agitation in the hills by the Gorkha Janmukti Morcha (GJM) in 2017, weighed heavily on the tea industry. The industry lost some of its key markets in Japan, which is now buying less from India and moving to other markets.

“Prices are poor this year, export demand is less ... Nepal is trying to compete (with Darjeeling tea) and making inroads, though their quality is not at par with the Darjeeling tea. The industry is struggling to survive,” Mohan told BusinessLine.

The tea bag makers from Japan, who used to procure approximately one million kg from India, have now become jittery as they feel that the 2017 crisis situation might arise again. So they have been looking at alternative markets, reducing their tea purchases from India by nearly half, sources said.

Higher production

The stoppage of work for nearly four months due to the agitation in Darjeeling in 2017 not only affected production that year, but also left its impact on the following years. The tea estates had to undergo heavy pruning work as its bushes had overgrown, thereby impacting production.

“As per our estimates, it would take at least three-four years for the production to normalise by following dedicated pruning efforts. However, some of the big companies resorted to short-term pruning programme, resulting in excess production at lower quality. This impacted prices,” a tea industry veteran said.

The production is up by nearly 10-20 per cent. This is in contrast to the situation in 2018 when the production was lower and buyers were stocking up, leading to a price rise. The lower offtake this year could also be because of a technical correction as buyers had bought surplus last year, a source pointed out.

Published on July 18, 2019
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