Rising tea prices upset Pakistan

Pakistan Tea Association (PTA), which agreed to lift more tea from India, is concerned about the spurt in tea prices.

Saeed Ahmed Khawaja, chairman of PTA, said, at the current level of prices, Kenyan tea was more competitive than Indian tea. He said, it would be difficult to source from India at such high prices.

Khawaja was part of the 20-member delegation currently visiting India to get better feel of the market.

Last year, India exported 6.4 million kg to Pakistan, which was more than double of previous year's exports. PTA had entered into an agreement with ITA to pick up tea from India.

Khawaja said that the main reason behind the high price in India was its strong domestic consumption. Last year, consumption was at 697 million kg and was expected to increase by another 18-20 million kg, this year.

While Indian was the largest tea producing country, Pakistan happened to be one of the strongest tea consuming country and hence it was a strategic fit for Indian tea producers.

C K Dhanuka, chairman Indian Tea Association (ITA) said, high cost of production in India prevented the producers from lowering prices.

Indian tea industry, it maybe mentioned, was poised on the verge a recovery after five straight years of recession.

Prices were higher than previous year's by Rs 7-8 per kg, largely on the back of a shortfall in crop and higher exports.

Figures upto June showed that the shortfall in production was around 34 million kg from last year's production of 857 million kg. Exports were at 79 million kg as compared to 60 million kg in the previous year.

Industry sources said, if the trend continued then prices were likely to remain firm.

Moreover, if the shortfall in crop sustained till September then the new year would start on a clean slate. After September, the production would start tapering.

One of the main reasons behind the firming of prices was that 2004 started off with virtually no carryforward and is the scenario was repeated then the industry may finally be out of recession.