Thursday, December 31, 2015

Indian tea exports looks ahead for brighter days

The tea export industry has finally a reason to cheer about in 2016 - export volume as well as prices have shown a rising trend from the April-October period this year and is likely to increase further in 2016.

While the export industry suffered a declining total earning of Rs. 685.45 crore or a negative 15.2% during the last fiscal year, export earnings in the current financial year till October has risen by 4.2% which has translated into a gain of Rs. 93.53 crore.

"This is the recovery year for tea exports and I think export prices will be better in 2016", Kamal Baheti, director of McLeod Russel, the world's largest tea producer told Business Standard.

The provisional exports data released by Tea Board of India has pegged tea exports at 119.25 million kg (mkg) valued at Rs. 2318.07 crore during the April-October months this year as against the 111.19 mkg valued at Rs. 2224.54 crore in the corresponding months of 2014-15.

The Indian Tea Association (ITA) as well as the Assam Tea Planters Association (ATPA) are also upbeat about the global and domestic tea prices.

"The prices are seemingly better and steady now both on the domestic and international markets", chairman of ATPA, Raj Barooah told this newspaper.

Auction prices in India stood at Rs. 125.59 per kg during the 2014-15 timeframe which has marginally increased to Rs. 128.35 a kg in the current fiscal year so far.

The same auction prices in global tea trading centres have also shown a rising trend varying between 8.2% in Limbe in Cameroon to 12.60% in Chittagong (Bangladesh) to over 31% in Mombasa in Kenya.

In the last fiscal year, Indian exports took a hit owing to crop loss in peak months while major tea-importing countries stocked up the abundantly available Kenyan tea. However, the Kenyan hoarding declining now, the tea exporters have a breather.

Revenue realization has already increased from major tea-importing counties like Russia, Kazakhstan, UK, Pakistan, Iran, UAE and others, however, some countries like USA, Germany, Egypt and others still remain on the negative side.

Nevertheless, one concern is predominant - although tea export revenues are getting back to normalcy and may head towards growth, unit prices (prices per kg) still remain in the negative showing a decline of 2.84% on an average.

"It has to be understood that unit prices are linked to world tea output. The situation will improve in the near future", Baheti added.

The importance of tea exports stems from the fact that the costly orthodox tea which accounts for over 50% of tea exports fetches the producers higher revenue in the international markets of Russia, Iran and USA among others.

"There are some varieties like orthodox tea which is of higher quality best suited for exports", Sujit Patra, additional secretary of ITA told this news-daily.

Indeed, when export revenues had fallen in the previous fiscal year, the demand for orthodox tea remained stable.

"The volume decline had majorly happened in the CTC (crushed, tear, curl) tea variant", Sujit Patra, additional secretary of ITA told this news-daily.

Although CTC leaves dominate the Indian tea-scape, Orthodox tea - estimated at just 10% of total production 1,197.18 mt - is prized because of its higher quality among tea connoisseurs.

"Expertise is needed to produce the orthodox variant in Darjeeling, Assam and Nilgiris whose demand is majorly from the export market", the ITA official said.

The production cost of orthodox leaves is 1.5 times higher than the standard CTC leaves whereas it also burns a hole in the consumer's pocket. While a kg of CTC leaves can brew 600 standard cups of tea, one can fetch only 250 cups from the same quantity of orthodox leaves.

With brighter days round the corner, the Tea Board of India has chalked out a strategy to promote tea exports. Key priorities range from developing 'single estate' and marquee brands to increase production of orthodox leaves for higher unit value to promotional activities.

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