— PHOTO: K. K. Mustafah

BETTING ON HIGHER PRICES: A worker plucking tea leaves at a plantation near Kothagiri in Nilgiri Hills, Tamil Nadu.

KOLKATA: With tea prices firming up in the first quarter of 2007, the Indian tea industry is gaining confidence about an improved financial showing in the current fiscal.

Erratic rainfall and warm temperatures have affected crop in the January-March period with the gardens in North and South India showing a drop in production.

In percentage terms, the drop has been sharper in north India, which has reported a 14.3 per cent fall, while in the south, the drop is of the order of 8.5 per cent. However, in the wake of increased domestic consumption, this is translating into good news for the tea companies.

The industry had already expressed optimism of turning around in 2006 and maintaining the trend in the following years. The Indian Tea Association (ITA) had earlier said in a status paper that the industry should now perform well and resume its growth momentum after seven years of recession, between 1998 and 2005.

Prices are expected to firm up further once the Special Purpose Tea Fund takes off. With replantation activities taking off, a crop shortfall is foreseen.

Industry sources said that between January and April tea prices increased by Rs. 1.52 a kg in the north Indian auctions touching Rs. 65.04 a kg while in the South Indian auction centres the increase was sharper — by Rs. 4.4 a kg — quoting at Rs. 54. All India prices averaged at Rs. 61.41 against Rs. 58.4 a kg in the first four months of 2006.

Sources said that lesser availability coupled with rising domestic demand, estimated to be increasing at around 3.3 per cent annually, was leading to a firming up of prices. A sustained campaign by the Tea Board has helped the industry hold its own in the face of competition from other beverages. This year, domestic tea consumption is estimated at about 825 million kg.

According to Aditya Khaitan, Managing Director of McLeod Russel India, the largest tea producer, the industry needs at least five years of good tea prices if it has to improve its profitability. He said the year 1998 was the last good year for tea and, while costs have increased by Rs. 18-20 a kg, sale prices had dropped by around the same amount leaving the industry in a quandary.

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