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Global Economics

India's Tea Export Prices Set to Soar

As the global economy recovers, supply of tea can't keep up with demand

Indian tea prices are set to soar in export markets as the global shortage has touched 56.8 million kg in the first eight months of calendar 2009. Kenya and Sri Lanka, the two other major tea producers, have witnessed the maximum slideback of 24 million kg and 41.1 million kg, respectively.

India exports CTC variety of tea mainly to Egypt, Pakistan and the UK and the premium orthodox variety of tea to Iraq, Iran and Russia.

"With the global markets gradually showing signs of recovery, the demand for quality tea is going up. This will have an effect on our export prices since global production has been much less this year," said a senior tea industry official.

Global tea production in the first eight months of calendar 2009 stood at 1,122 million kg as compared to 1,178.8 million kg in the corresponding period of the previous year. Countries which have gained marginally in production are Indonesia, Malawi and Uganda.

India's tea exports fell 14% in the first eight months of 2009 as low output after a severe drought hit production earlier this year. Exports in value terms rose to Rs 1,518.81 crore from Rs 1,423.04 crore in the same period last year. The unit price realisation has increased to Rs 134.71 per kg in the first eight months of calendar year 2009 as compared to Rs 108.86 per kg in the corresponding period of the previous year.

"Even though we may end up in less exports this year, the export bill will be significantly higher (this year) because of rising prices. In the next couple of months, the prices may further go up," said a Tea Board official.

Rising internal consumption has pushed up prices at the auction centres in the country as well. Average auction prices in Kolkata has shot up to Rs 112.01 per kg as against Rs 97.02 per kg in the previous year.

Similarly, at the Guwahati auction, tea price rose to Rs 103.85 per kg from Rs 83 per kg, and at the Cochin auction, the price rose to Rs 87.37 per kg from Rs 62.21 per kg.

Sutanuka Ghosal writes for The Economic Times.

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