The Indian tea industry finds itself in a bind. A pest attack and excessive rains have damaged crops. Prices are rising in some markets and exports too are on an upswing. Yet, industry bigwigs are saying that it is a difficult year, although the industry regulator, the Tea Board of India, is unwilling to press the alarm button as yet.
A review of the situation taken recently by the apex association of North Indian tea producers, the Indian Tea Association, revealed that the industry has suffered a 20 million kg crop loss which they say is among the biggest-ever.
Available statistics show that total North Indian loss has been 13.7 million kg between January and July with Assam taking the biggest hit of 16.5 million kg. The recent meeting which reviewed the situation in August noted that crops were down by 3.8 milllion kg. Total North Indian crop was now expected to be 8 million kg lower than that of 2009.
“The situation is serious,” ITA Chairman Aditya Khaitan told The Hindu recently saying that there was now little time to make up for the industry which is facing a difficult year. His company McLeod Russel India, the world's largest bulk tea producer too has suffered a crop loss. The upward swing in tea prices, prevalent for sometime now, have been maintained, mainly in the Kolkata and Siliguri auctions. In North India between January and July, prices have improved marginally and averaged at Rs.108.7 a kg.
Major producers say that prices are not high enough to compensate the industry for the loss that they have begun to incur on account of increased cost of pesticides and higher wage costs due to the implementation of a revised salary package for the Assam workers as well as the impending bonus discussions for the workers in the gardens in West Bengal.
The fact that export markets are now recovering from the global downswing and India's main competitors in the world tea market, Sri Lanka and Kenya have increased their output in the period under review, is adding to the woes of the North Indian tea producers.
Kenya has seen a 53 per cent increase in output in the first six months of the year while Sri Lankan production has risen by 23.4 per cent between January and July. China, which now has a sizable presence in the world black tea market has also raised its production by 14 per cent during this period.
South makes gains
The industry in South India has made handsome gains in its production between January and July (up by 15 million kg) but most of this is for exports.
Rising consumption in the domestic tea market coupled with the demand usually seen during the winter months point towards a pipeline-shortage of around 90 million kg in 2011. The industry says that production gains scored by the South Indian tea industry will not be able to make up for the losses suffered by the North, and India is likely to close the year with a lower output. However, Basudeb Sen, Chairman of Tea Board of India, is not willing to be alarmed.
“It is too early, some production months are still left,” he says adding that the 20 million kg shortfall translates to a mere two per cent loss on a base of a 1,000-million kg-odd production.