Tea prices have increased by five to 10 per cent due to lower crop arrival in the first two months of this fiscal. The crop was lower mainly due to drought conditions in the tea growing areas in Assam and North Bengal.

The improved prices have raised the hopes of tea companies of being able to protect their profitability. “Drop in earnings was a growing fear among tea companies,” an official at the Indian Tea Association, the apex industry association for north Indian growers, said.

Scanty rainfall and high temperature since the beginning of 2014 resulting in severe drought in Assam have resulted in a 35 per cent lower crop between April and May, 2014. During April & May, many parts of Assam Valley, Darjeeling and Dooars did not receive any rainfall which had played havoc on the health of tea bush and on made tea.

Crop loss is being estimated by ITA at an unprecedented 30 million kg in the first two months as compared to the same period in 2013.

A senior official at McLeod Russel India Ltd., the world’s single largest bulk tea producer, said that higher prices were likely to offset the loss in volume for most companies. MRIL, whose own production stood at 64 million kg in 2013-14 (it buys another 23 million kg), had lost about two million kg in the first two months, the official said.

He said that while the rains had come in most of tea-growing regions, prices, now averaging at about Rs. 160 per kg. were expected to remain firm. ITA said that a shortage was likely as domestic tea consumption was growing at an annual rate of 3 per cent.

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