Business Bureau :
TEA production in the country is likely to decline 13 per cent in the current calendar year due to restrictions on labour deployment amid the ongoing COVID-19 pandemic and adverse weather conditions, which will result in an increase in production cost, according to a report. Factors like restrictions on labour deployment due to the coronavirus pandemic have impacted the bulk tea players in northern India in an unfavourable manner during March, April and May 2020, according to the report by rating agency ICRA. While there were expectations of production returning to normal levels from June, inclement weather conditions and flooding in Assam in June witnessed crop losses ranging from 15 per cent to 25 per cent, it added.
Some impact of the adverse weather conditions on production is likely to be felt in July as well, the report noted. On the other hand, the South Indian production witnessed only a marginal loss during the lockdown period, it said. The report also said that as tea is a fixed cost-intensive industry, a decline in the crop will substantially increase the cost of production for the NI bulk tea industry.
“As per our estimates, domestic tea production in CY2020 is expected to decline by 13 per cent on a year-on-year basis, with production from North India being estimated to decline by 160-170 million kg (mkg), while production from South India is expected to show only a marginal decline,” ICRA Vice-President and Sector Head (Corporate Sector Ratings) Kaushik Das said. Since tea is a fixed cost-intensive industry, the decline in production is likely to increase the cost of production, he added. “We estimate the cost to increase by Rs 25-30 per kg, that too without considering any increase from the current wage rates,” he noted.
The decline in production from NI has substantially pushed up prices at auction centres, where prices, particularly that of CTC teas, have rallied by around 30-35 per cent in May and June, said the report. However, the current price trends may not be reflective of the full-year trends, the report added. It also said production from NI is seasonal in nature -- both in terms of quality and quantity. The crop that has been lost is primarily of the first and second flush, which are the best-quality teas for the year.