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Tea industry hoping for Diwali bonanza

Excess tea in the market ensured that prices did not go up despite the drop in output from the organised tea sector in August.

, ET Bureau|
Sep 21, 2019, 02.47 PM IST
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The silver lining in this scenario is rising prices of orthodox teas. Prices of orthodox teas appreciated 10% year-on-year, as Iran bought more than 35 million kg of the commodity in the January-July period.
KOLKATA: Prices of second flush teas and monsoon teas from Assam and West Bengal that constitute the bulk of the country’s tea crop have remained stagnant this year. The industry is expecting an increase in prices before Diwali, when demand for tea usually goes up.

“It has been a flat year for the tea industry. Prices of Assam CTC and dust teas have been lower than in 2018. The CTC and dust produced in West Bengal have fetched similar prices as last year, which means that there has been no movement in prices,” said Vivek Goenka, chairman, Indian Tea Association (ITA).

July crop increased 8.3% year-on-year to 176.07 million kg, helped by a spurt in plucking in the top producing state of Assam. The state produced 97.02 million kg of tea during the month, higher than 93.71 million kg a year ago.

“The August crop figures have not yet come from the Tea Board. But, according to the production figures available from the estates who are members of the ITA, August tea production in Assam was down 17.9% and in West Bengal down 5.5%. The combined drop in August was 14.8%,” said Goenka.

However, excess tea in the market ensured that prices did not go up despite the drop in output from the organised tea sector in August. There was some carry-over stock from 2018 and the excess crop produced in July.

Prices of Assam CTC and dust varieties since the first sale in July have fallen 2-3% while those of the teas produced in West Bengal have remained stagnant at last year’s level.

Domestic consumption and exports have not picked up with the rapid increase in production, leading to an oversupply in the sector. Between January and July, tea exports from Assam and West Bengal declined 3.58% year-on-year.

“The sector is reeling under cost pressure because of price stagnation in the backdrop of increasing cost of production and mismatch between demand and supply. Domestic consumption of tea has to go up to absorb the excess tea that is being produced in the country,” said Goenka.

The silver lining in this scenario is rising prices of orthodox teas. Prices of orthodox teas appreciated 10% year-on-year, as Iran bought more than 35 million kg of the commodity in the January-July period.

“The way forward is to produce more orthodox teas. At present, there is a subsidy of Rs 3 per kg of orthodox tea. We have asked the government to give an incentive of Rs 25 per kg for producing more orthodox teas,” said Goenka.

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