Tea Prices Seen Firm Untill Year-End

Tea prices in India, which have of late shown signs of firming up after being dormant last year, are likely to remain steady at least until the end of this year. The prices will be firm at least for the next six months, particularly in view of Russia taking part in auctions again in south India, industry sources said.

Tea prices have increased by Rs five a kg on an average of late and it has also been attributed to production shortfall in other major tea-producing countries like Kenya and Sri Lanka besides Russia's re-entry into Indian market.

Last year, tea prices fell to an abysmal Rs 38 a kg in south India, threatening the viability of the tea gardens particularly in Kerala and Tamil Nadu.

 

The prices had dipped as Russia chose to opt for the Sri Lankan market from June 1996 to meet its requirements instead of south India.

The tea purchase was reported to have taken place in lieu of arms purchase by the island nation.

Indian tea sector has been undergoing a dismal phase ever since the disintegration of the erstwhile Soviet Union as the communist nation had been the largest buyer of Indian tea. During 1996, tea exports dipped to a low of 150 million kg.

Besides Russia's entry, tea prices have also tended to increase as production declined in India during February and March last.

Sources said tea production in Kenya and Sri Lanka, which are the largest producers of the

commodity after India, had dipped due to drought in those countries.

hile Kenyan tea crop is reported to have declined by 40 per cent, there was a 2.2 million kg shortfall in Sri Lankan crop and 3.3 million kg in that of Indonesia.

The production shortfall had led to Kenya hiking its prices for the commodity, while Sri Lankan tea prices, which had always been quoted lower than south India prices, also increased significantly. This had led to Indian tea prices being 20 per cent lower than Sri Lanka prices in rupee terms, particularly under the rouble-rupee trade.

Meanwhile, commerce ministry sources told PTI that tea production in the country this year was expected to be around last year's record production of 780 million kg. The anticipated production was against the targeted production of 825 million kg. Even last year, tea production was stated to be less by five million kg against initial production estimates of 785 million kg.

The sources said though tea production had suffered a setback during the first quarter, it had picked up during the second quarter. During the first quarter, tea production in the north-east declined by 11.1 million kg but the shortage had been made up to some extent by a 6.3 million kg excess production in south India. In all, India produced 54 million kg of tea during the first quarter of the annual year against 58.5 million kg produced during the same period in 1996.