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According to statistics, packaged tea sales of the entire industry in value terms has declined by 11.2 per cent for the quarter ended June 2003. In volume terms, tea sales have declined month-on-month over the last one year.
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Good monsoon across all tea-growing areas has increased the possibility of good production this year.
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The first five months of the year have seen an increase in production of about 223,500 tonne from 187,600 tonne during the same period last year.
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Total tea exports in January 2003- July 2003 are also down by 2.8 per cent to 715.4 tonnes from 998.2 tonne last year.
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Higher inventory may continue to put pressure on domestic prices in the forthcoming months. Tea prices are unlikely to be much higher than last year levels.
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The Indian Tea Association has painted a grim picture of the tea industry, as it grapples with a bumper crop in a year plagued by a drop in exports.
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In the current financial year, an excess production to the tune of 38-44 million kg to 864-870 million kg and a decline in exports by 12 million kg to 186 million kg are expected. This may consequently pull down prices.
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From a peak of Rs 62 per kg in February 2003, tea prices have dropped to Rs 54 per kg in June 2003, clearly indicating the lacklustre state of overseas and domestic demand.
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Exports have declined on account of loss of Iraq and Russian markets by 14 million kg and 4 million kg, respectively.
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Moreover, the rate of growth in domestic consumption has also been lower at 1.8 per cent than the earlier expectation of 2.8 per cent-3.2 per cent.
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According to a report by IDBI Capital, the industry is making all necessary efforts to increase exports, particularly of orthodox variety by at least 20 million kg in the current fiscal, since Sri Lanka, which is generally perceived to be a dependable supplier, has suffered from a few quality issues.
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Besides oversupply and lower demand situation, disapproval of inter-state sales by the commercial taxes department and the claiming of the TNGST rates for all teas sold have led to the collapse of the Coonoor tea market auctions and prices continue to slide.
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Tea auction in Coimbatore has also witnessed heavy withdrawals, lowering prices by Rs 1.5 to Rs 4.2 per kg.
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Tea prices continued to show downward trend at Coimbatore auction centre last week with Green leaves fetched only Rs 2.75-3.25 per kg . Best orthodox leaf also came down to Rs 40-42.
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According to IDBI Capital, tea prices in India have shown a sharp decline of 35 per cent from Rs 73.85 in January 2001 to Rs 54.5 in July 2003. Tea prices at Colombo and Mombassa auction centers have also shown a declining trend.
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At Colombo, prices have come down from 170.5cents per kg in March 2002 to 142.0cents per kg in July 2003, registering a decline of 17 per cent.
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However, this downward movement is considered positive for Tetley. Since it sources tea globally, it is able to benefit from decreasing prices.
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The report says that the declining pricing trend has made an adverse impact on Tata Tea because its average realisation from selling tea at auction centers has reduced from Rs 98 per kg in financial year ended march 2002 to Rs 89 per kg in financial year ended March 2003.
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Though in the financial year ended 2003, Tata Tea
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