Industry struggles to up tea prices at auctions as output plays spoilsport

Widespread availability of low-grade leaves adds to companies woes as auction prices dip in Kolkata and Guwahati

A surge in tea production till June and widespread availability of low grade leaves pulled down tea prices of north Indian teas even as companies and the Tea Board of India are battling to jack up prices in the auction centres. 

According to data from the Tea Board, auction prices fell by 4.23 per cent at Rs 173.17 a kilo in the Kolkata auction centre and by 5.41 per cent at Rs 156.14 per kilo in the Guwahati auction centre during the last week of May. The average prices have been hovering at the same level in the auctions of the previous month as well.

“During April-June, production in Dooars was up by 10-15 per cent and in Assam, it rose by 4-5 per cent. Higher availability of tea has been denting auction prices,” Atul Asthana, managing director and CEO at the Goodricke Group told Business Standard.

In May alone, West Bengal registered a rise of nearly 17 per cent in production at 43.35 million kg (mkg) primarily led by small growers while Assam’s production increased by 17.55 per cent at 66.52 mkg, again led by the small growers. 

“Since tea is a perishable item, the produce cannot be stocked for future when prices can firm up and thus, a much higher volume of tea has entered the auctions,” Asthana told this newspaper.

Industry officials stated that apart from the situation of over-production, abundant availability of low-grade teas has been keeping the prices muted.

Officials are of the view that low quality teas always has a cascading effect in pulling down prices of higher grade teas. This is despite several estates and the Board focussing on production of high quality teas.

“Packateers should service with good quality tea to bring back consumers and boost consumption”, Sujit Patra, secretary at the Indian Tea Association told this business daily.

To take stock of the situation, the Board is in the process of mandating a minimum price of tea below which, the leaves cannot be sold in the auctions. While it has narrowed down upon Rs. 60 a kilo for the south Indian variants, it is still in the process of finalising prices for Assam and West Bengal.

While the bottom-most price assures a minimum price recovery for the sellers at the auctions, it also helps in flushing out bad quality tea from the market.

The Board’s deputy chairman, A K Ray is of the view that at times, sub-standard tea which is unfit for human consumption makes its way to the buyers as low-grade leaves and if auction prices is to improve, such tea has to be “identified and destroyed”.

Around 50 per cent of the total tea produced in India is sold in auctions and the rest in private sales