Export of Indian teas increased by 5.7 per cent in the first four months of 2017 as other two major tea exporters – Kenya and Sri Lanka – struggled with erratic cropping patterns leading to supply side issues, said credit rating agency ICRA on Tuesday.

The continuation of such a favourable export scenario going forward would have a positive impact on domestic prices as well, but cost pressures due to increase in wage rates, particularly in the Assam tea gardens, could keep margins in check, the agency said in a release.

India exports around 20 per cent of its tea production. However, exports play a vital role in maintaining the overall demand-supply balance and, thus, price levels in the domestic market.

“While the export performance in recent months is encouraging, the full-year performance will be determined by the volumes during the period June to August, when most of the export contracts are finalised,” said Kaushik Das, Vice President who heads corporate sector ratings at ICRA.

“With the likelihood of lower tea production outside India in Calendar Year 2017, and given the trend in international prices, the prospects of exports from India in the current year appear favourable,” he said.

While one of the worst dry spells in recent years cut tea production in the East African country by a third, floods last month affected the quality of bulk teas available from Sri Lanka.

In the first four months of the 2017 calendar year, black tea production in major tea-growing countries of India, Kenya and Sri Lanka witnessed a slump, primarily due to a significant drop in production in Kenya. “This decline in crop availability has led to the firming up of prices in most auction centres globally,” ICRA said.

According to the agency, auction prices in Sri Lanka and Kenya went up by 44 per cent and 24 per cent respectively.. The prices of Sri Lankan teas, which are mostly the orthodox variety, surged to touch $4.08 per kg during the first four months of 2017 as compared to $2.84/kg in the corresponding previous months, while Kenyan tea prices, which are entirely of CTC variety, touched $2.98/kg as against $2.41/kg earlier.

Even though political unrest in Darjeeling has affected the plucking of second flush, its impact on exports would be known only a month and half later, Das said.