Sri Lanka & #8217;S Perfectly Brewed Cup Of Tea

Analyst's View

Sponsoring a national cricket team is expensive. It can be shouldered only by companies doing phenomenally well. Dilmah, a tea group, is doing it for Sri Lanka. The big Indian tea companies, with profits falling, are in no position to play the role of Dilmah.

But it is wrong to put Sri Lanka in the same group as other tea producing countries. Last year, average auction realisation of north and south Indian teas at Rs55.99 a kg was down Rs5.68 a kg. At this price, production cost was not recovered. Not surprisingly, in Dooars alone nearly two dozen estates are closed.

In contrast, auction price for Sri Lankan tea rose from Rs135.06 a kg in 2000 to Rs143.54 in 2001 and further to Rs149.30 last year. Sri Lanka then must be doing a host of right things which India is not.

Sri Lankan teas sold at higher rates last year when production was up nearly 15 million kg to 310m kg. As domestic tea consumption there is just 20m kg, it had to push tea in the world market without compromising prices.

Lower Indian production of 27.5m kg to 826.2m kg in 2002 was not enough to arrest price falls here. Gardens in Assam and north Bengal harvested nearly 10m kg extra in December when only middlings and low quality teas can be made. Chasing volume at the cost of quality was the bane of industry here.

Auction offerings continued to fall, to 456m kg in 2002 against 463m kg in 2001 and 507.2m kg in 2000. A senior official said unlike in India, Sri Lanka has no private sales and all tea was routed through auction.