Tea growers refuse to celebrate price rise

Tea growers based in southern India have refused to read much into the recent rise in prices.

While some industry observers have described the rise as the beginning of a turnaround, battered grower groups are adopting a more cautious approach.

They prefer to see the current situation as a result of pure market dynamics, with demand exceeding supply.

A spokesman of the United Planters Association of Southern India (Upasi) said, "A cursory look at the year so far reveals a not too rosy picture. From the statistics we can infer that the rise in prices is not due to any revival in the industry but because of low production and higher exports."

While prices have indeed inched up, the situation is not too comforting for three reasons, Upasi said.

One, the price rise of Rs 5 to 8 per kg, when compared to the Indian tea production fall of 38 million kg and rise in exports of 14 million kg in the first nine months of the calendar year, clearly did not translate to much.

If the crop is good next year, prices may crash again.

Two, prices rose when compared to last year, but prices last year happened to be the lowest in a decade.

The last time prices ruled at Rs 40 levels in south India and around Rs 65 for North Indian teas was in 1993-94, they pointed out.

Three, despite the price rise the industry is reeling under the fall in output.

Growers are marketing lower volumes and in terms of revenue remain where they were last year, if not lower.

However, growers accept that the upward movement of prices has helped to some extent.

The managing director of a top garden owning company marketing its own tea brands said the price rise helped many gardens reduce losses.

"With the cost of producing tea ruling at Rs 60 a kg in south India, the average realisation of Rs 46.16 this year compared to Rs 40.71 last year will help us contain the loss to under Rs 15 a kg now," he commented.

A tea trader based in Coimbatore said exports grew mainly on account of demand from low value tea consuming countries like Iraq.

This is reflected in the alarming fall in exports unit value to Rs 46 in the first nine months from Rs 63.5 a kg registered during the same period last year.

Another problem that has developed this year is the sharp rise in imports of low value products.

With over 95 per cent of imported tea being re-exported, the jump in imports to about 20 million kg in January-September of this year from 5.5 million kg during the corresponding last year, will only pull down the image of Indian tea globally, they said.