High Tea

After years of gloom, the prospects of the Indian tea industry seem to be brightening up again. A report.

It might be just a small indicator but if the tea auctions of the past two months are anything to go by, the tea industry is finally looking up after several years in the doldrums. For the last two months auction prices of tea have moved up by an average of 20-25 per cent and are currently ruling at around Rs 90 per kilogramme.

The rise is being attributed to a fall in production in Kenya and Sri Lanka, which are two of Indias biggest competitors. And a lot of analysts tracking tea are suddenly perking up.

 

Their logic is simple. If an international competitor is forced to cut production for one reason or the other it will mean that there is going to be a shortfall in global supply of tea. As a result Indian industry can step in and fill the gap by exporting more - and charge superior prices in the process.

In order to explain exactly how and why this is being anticipated we first take a detailed look at the dynamics of the domestic market over the past few years. The tea industry in the country, if a 15 year period is taken as the basis for evaluation, shows that tea production in India has changed at a CARG of 2 per cent per annum. The one major inference to be drawn from this figure is that growth rates tend to be on the lower side, near the Hindu rate of growth.

However, even this rate of growth has been achieved through improved realisation from improved crop cultivation techniques. Per hectare yields have gone from 1509 kgs in 1979 to 1784 kgs in 1993. In other words, there has been very little increase in the area under cultivation. In fact the latter has grown by a modest 0.9 per cent CARG besides almost saturating from the mid eighties at around 400-425 thousand hectares. Since the area under cultivation has changed by very little it stands to reason that the industry has been influenced more by overall demand. By