Black tea prices surge 42% from a year earlier, making the brew dearer for consumers

KOLKATA: Black tea prices have surged 42% from a year earlier, making the brew dearer for consumers in the midst of the pandemic.

However, packet tea companies have limited their price increase to 20% in the July-August period, fearing that higher prices would hurt consumption.

Prices rose as production declined due to the lockdown and heavy rains that damaged the tea crop in Assam and West Bengal in June and July. Output dwindled by 26% to 348 million kg in the first half of 2020 from a year earlier, according to Tea Board India figures. A recovery is unlikely in the second half of the year, industry executives said.

The price increase has been mainly in the common CTC leaf and dust category, which has prompted many planters to shift from orthodox teas to CTC tea production.

The CTC leaf now fetches Rs 303 per kg at the Kolkata auction compared with Rs 171 per kg a year ago. The price of dust variety has shot up to Rs 310 per kg from Rs 184 per kg a year ago.

“CTC tea prices have surged a lot. Though the packet tea players have increased prices by 20%, it does not cover the price at which we are buying from the auctions,” Viren Shah, president of the Federation of All India Tea Traders Association told ET. “Out-of-home consumption has been affected due to this pandemic. However, people are drinking more tea at home.”

The federation had asked the commerce ministry to allow them to import tea for domestic purposes for the current year. At present, tea can be imported only for re-export. Planters strongly protested against the federation’s proposal.

India’s tea exports will also be affected this year because Kenya’s production has gone up by more than 30% and its prices are lower. India’s tea exports in the first five months of 2020 fell 26.6% to 74.4 million kg from a year ago. The country exports CTC grade mainly to Egypt, Pakistan and the UK, with the orthodox variety shipped to Iraq, Iran and Russia.

“Orthodox tea production this year will not be more than 50 million kg in comparison to 75-80 million kg. Payment from Iran, the biggest buyer of orthodox teas, has slowed down. That is why many planters are converting from orthodox to CTC as the price of the latter has appreciated,” said Mohit Agarwal, director of Asian Tea and a leading exporter to Iran.