Bangalore, March 25 Strong domestic demand is expected to help the Indian tea industry to tide over the anticipated slippage in exports to Russia this year.
The Tea Board expects that there could be some impact on exports in the short-term as Russian buyers are delaying their purchase decisions due to the credit crunch. Russia is the largest buyer of India teas accounting for a fifth of the country’s exports.
“We could see some deferment, but we will tide over that,” said Mr Basudeb Banerjee, Chairman of the Tea Board.
Recession support
Though the exports of higher value teas such as Darjeeling tea would be affected, Mr Banerjee said there could be an increased demand for Indian CTC teas as recession-hit consumers would switch over to consuming tea from other costlier beverages.
Recessions have historically helped the tea industry as demand increases in such an environment with people consuming more tea while staying at home, Mr Banerjee said.
The global recession has not had any impact on the Indian tea exports till now, Mr Banerjee said. For calendar 2008, tea exports from India stood at 196 million kgs (mkg), up 10 per cent over the 178 mkg exported in 2007. However, for the fiscal year-ending March 2009, the exports could fall short of the targeted 210 million kgs.
“The shortfall in exports is more to do with the availability of tea rather than the demand per se,” Mr Banerjee said adding exports in the first quarter of calendar 2009 could decline by a fifth.
Prices to stay firm
Lack of timely rains has impacted the Indian tea output in the January-March quarter. According to UPASI estimates, tea output in South India could drop by 40 per cent, while it is expected to shrink considerably in Assam and West Bengal.
Key growing areas in Assam have witnessed a dry spell of six months September-February this year, the worst ever in the past 50 years, said Mr Prabhat K.Bezboruah, CEO of Jorhat-based Bokahola Tea Company Pvt Ltd.
Mr Bezboruah estimates that the crop size could shrink by 24 million kgs in the first four months of 2008. Production in January-April accounts for about eight per cent of the annual output of 800 million kgs in the northern States.
Further, Mr Banerjee said the strong domestic demand could help offset the decline in exports. Quoting a study by Operations Research Group (ORG), Mr Banerjee said domestic tea consumption has grown at 3.4 per cent last year, up from 2.5 per cent growth witnessed in 2006-07.
“The domestic demand is strong and there’s a shortage in supply. Tea prices will remain firm and we expect the industry to do well,” Mr Banerjee said.
Source : Business Line