 "Kenya's loss is Indian tea sector's gain")
Kenya’s loss could well be a gain for the Indian tea sector. After a dismal year in export, things are looking up for the sector, owing to a drought in Kenya, one of the world’s largest exporters of black tea.
The drought in Kenya has pushed up tea prices to $3-4 a kg on an average. By comparison, Indian tea is priced at $3-3.5 a kg.
“This is the second year of El Niño for Kenya. The first year hit it positively, with more rains and excess crop, which pushed prices down and made it more competitive in the export market,” said Azam Monem, vice-chairman of Indian Tea Association and whole-time director of McLeod Russel India, the world’s largest bulk producer.
Overall, McLeod exports about 30 per cent of its production, against the sector’s average of 20 per cent. “Last year, the crop was down 12 per cent during the exporting months of May-September, resulting in a 10 per cent fall in exports year-on-year,” Monem said.
Data provided by the Tea Board for April-January 2014-15 showed export had declined 27.4 million kg to 158.6 mn kg compared to the year-ago period. In January, exports stood at 16 mn kg, against 19.7 mn kg a year earlier; in value terms, it was Rs 3,114 crore, compared with Rs 3,769 crore.
With more competitive pricing, however, export prospects now appear bright for McLeod and other Indian companies.
Kenyan tea is in direct competition with Assam CTC, exports of which stand at 50-55 million kg a year. The central government has already identified the markets in which it plans to push Indian teas. These are Kazakhstan, Russia, the US, China, Iran, Egypt and Chile. Most of these countries are buyers of CTC.
The drought in Kenya has pushed up tea prices to $3-4 a kg on an average. By comparison, Indian tea is priced at $3-3.5 a kg.
“This is the second year of El Niño for Kenya. The first year hit it positively, with more rains and excess crop, which pushed prices down and made it more competitive in the export market,” said Azam Monem, vice-chairman of Indian Tea Association and whole-time director of McLeod Russel India, the world’s largest bulk producer.
Overall, McLeod exports about 30 per cent of its production, against the sector’s average of 20 per cent. “Last year, the crop was down 12 per cent during the exporting months of May-September, resulting in a 10 per cent fall in exports year-on-year,” Monem said.
Data provided by the Tea Board for April-January 2014-15 showed export had declined 27.4 million kg to 158.6 mn kg compared to the year-ago period. In January, exports stood at 16 mn kg, against 19.7 mn kg a year earlier; in value terms, it was Rs 3,114 crore, compared with Rs 3,769 crore.
With more competitive pricing, however, export prospects now appear bright for McLeod and other Indian companies.
Kenyan tea is in direct competition with Assam CTC, exports of which stand at 50-55 million kg a year. The central government has already identified the markets in which it plans to push Indian teas. These are Kazakhstan, Russia, the US, China, Iran, Egypt and Chile. Most of these countries are buyers of CTC.
The sector isn't particularly worried about an inadequate monsoon. "5-10% less rainfall is not going to affect Assam teas because by the time the monsoon sets in, the crop would already be ready for export markets," Monem said.
What is worrying the sector is the government's Foreign Trade Policy 2015-2020. Earlier, tea was included in the Vishesh Krishi Gram Udyog Yojana and enjoyed a 5% benefit across bulk and value-added teas. But under the Merchandise Exports from India Scheme, the benefit has been reduced to three% on bulk teas, which is likely to affect the competitiveness of Indian tea. Bulk tea accounts for about 90% of overall tea export.