Tea export sector finally has a reason to cheer about in 2016 with export volume and prices showing a rising trend from the April-October 2015 period which is likely to increase further in the new year.
While the export sector suffered a declining total earning of Rs 685.45 crore or a negative 15.2 per cent in FY15, export earnings till October has risen 4.2 per cent, which has translated into a gain of Rs 93.53 crore.
“This is the recovery year for tea exports and I think export prices will be better in 2016,” Kamal Baheti, director of McLeod Russel, the world's largest tea producer, told Business Standard.
Provisional exports data released by the Tea Board of India have pegged tea exports at 119.3 million kg, valued at Rs 2,318 crore, during April-October 2015 against 111.19 million kg worth Rs 2,225 crore in the year-ago period.
The Indian Tea Association (ITA) as well as the Assam Tea Planters’ Association (Atpa) are also upbeat about the global and domestic tea prices.
“The prices are seemingly better and steady now both on the domestic and international markets,” said Raj Barooah, chairman of ATPA.
Auction prices in India stood at Rs 125.59 a kg during 2014-15, which has marginally increased to Rs 128.35 a kg. The same auction prices in global tea trading centres have also shown a rising trend varying between 8.2 per cent in Limbe in Cameroon to 12.6 per cent in Chittagong (Bangladesh) to 31 per cent in Mombasa in Kenya.
In FY15, Indian exports took a hit owing to crop loss in peak months while major tea-importing countries stocked up the abundantly available Kenyan tea. However, with the Kenyan hoarding declining now, tea exporters have a breather.
Revenue realisation has already increased from major tea-importing counties such as Russia, Kazakhstan, the UK, Pakistan, Iran, United Arab Emirates and others. However, some countries such as the US, Germany, Egypt and others still remain on the negative side.
Nevertheless, one concern is predominant – although tea export revenues are getting back to normalcy and might head towards growth, unit prices still remain in the negative territory, showing a decline of 2.84 per cent on an average.
“Unit prices are linked to world tea output. The situation will improve in the near future,” Baheti added.
The importance of tea exports stems from the fact that the costly orthodox tea, which accounts for 50 per cent of tea exports fetches the producers higher revenue in the international markets of Russia, Iran and the US, among others.
“There are some varieties like orthodox tea which is of higher quality best suited for exports,” said Sujit Patra, additional secretary of ITA.
When export revenues had fallen in the previous financial year, the demand for orthodox tea remained stable.
“The volume decline had majorly happened in the CTC (crushed, tear, curl) tea variant,” Patra added.
Although CTC leaves dominate the Indian tea-scape, orthodox tea holds a premium thanks to its higher quality.
“Expertise is needed to produce the orthodox variant in Darjeeling, Assam and Nilgiris whose demand is majorly from the export market,” Patra noted.
The production cost of orthodox leaves is 1.5 times the standard CTC leaves, while it burns a hole in the consumer's pocket. While a kg of CTC leaves can brew 600 standard cups of tea, the same quantity of orthodox leaves can give only 250 cups.
With brighter days round the corner, the Tea Board of India has chalked out a strategy to promote tea exports. Key priorities range from developing 'single estate' and marquee brands to increase production of orthodox leaves for higher unit value to promotional activities.