Analyst firm ICRA has said that the current political unrest in Darjeeling is likely to impact the production and exports of the premium tea. While it is a niche product catering to specific markets, the reduced availability of second flush Darjeeling tea is likely to lead to some substitution of such tea with those from different geographies, the firm said.
ICRA believes that the impact of the current situation on revenue is estimated to be about ₹150 crore at present. However, a prolonged political unrest might result in a significant impact.
It noted that Darjeeling teas have historically been of very high quality and are almost entirely exported.
But, the impact of the loss of export volumes for Darjeeling tea on the domestic supply-demand situation was expected to be limited given the limited domestic demand, it said.
Moreover, with an annual production of about 9 million kg, Darjeeling accounts for only about 0.8% of the Indian tea crop
Kaushik Das, vice-president and sector-head, Corporate Sector Ratings, ICRA Limited, said: “For Darjeeling teas, a plucking cycle of five to six days is followed. Timely plucking of fine leaves contributes to the overall quality of the tea produced during this period. Thus, the lack of plucking activity over the past 20 days is expected to have an impact on the production volume as well as the tea quality, even when operations re-start. This is likely to impact the export performance of Darjeeling teas.”
This year, weather patterns have been favourable, leading to good quality and increased production in the first flush. Initial indicators for the second flush were also positive, with average auction prices for Darjeeling tea in the first week of June increasing from ₹346.6/kg in 2016 to ₹360.66/kg in 2017 (Y-o-Y growth of 4%). However, leaf plucking and processing activities have been suspended since the second week of June, following the political strife in the region.
