ibnlive » Business

Oct 13, 2006 at 02:41pm IST

Tea mkt: India to gain from Kenya's loss

New Delhi: Prospects are looking better for India's tea exports this year, as the country might fill the shortfall in global supply created by declining production in the world's largest tea exporting nation Kenya, rating agency ICRA believes.

The country's tea exports might stabilise in 2006-07 after a continuous fall since 1991, the analysts at ICRA said in a report.

Kenya, India's major competitor in the CTC tea in the export market, is expected to report a 16 per cent decline in its production this year due to drought conditions, it added.

TEA PRODUCTION: India may face a marginal fall of around three per cent as total output in 2006.

As CTC (crush, tear, curl) tea accounts for two-third of India's tea production, India can fill the supply gap of Kenya's export destinations that include Pakistan, Egypt and the UK, ICRA said.

India's tea exports stood at 79.1 million kg during January-June 2006 as against 80.6 million kg in the corresponding period last year.

In 2005, the Indian export was 187.6 million kg compared to Kenya's 349.8 million kg.

India was the world's top tea exporting country till 1991, before losing its position to Kenya.

"Exports peaked at around 216 million kg (Rs 12.11 billion) in FY1991, but have declined subsequently. During FY2006 exports declined 6 per cent in rupee terms. In volume terms, tea exports declined 11.2 per cent during FY2006 to around 163 million kg.

"Exports started slowing down starting October 2004 owing to rise in domestic auction prices which made exports inviable, and unavailability of orthodox variety of tea which is preferred by importing countries," ICRA said in its study.

The study pointed out that exports have reported a decline to 17.5 per cent of production in 2005.

On tea production, India may face a marginal fall of around three per cent as total output in 2006 is estimated at 900 million kg compared to 928 million kg a year earlier, says the study.

The study pointed out that with expected stagnation in world production during 2006, prices are expected to be firm during 2006 with expected weakening in 2007-08.