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Price gains spell fatter tea profits

Calcutta, Sept. 27: The bottomline of tea companies could get a boost in the second half of the financial year following a shortage-induced price recovery at auctions.

Production till August was down 34 million kgs, while the amount offered at auctions dipped 13 million kgs.

Exports have grown a modest 2 million kgs to 116.5 million between January and August from 114.6 million kg in the corresponding period of the previous year. However, every kg of tea has fetched a lower price of Rs 85.60 compared with Rs 93.71 in the previous year.

Things are looking up at auctions, where prices have firmed up by almost Rs 4 per kg over this month. Assam CTC tea is now going for Rs 73.45 per kg against Rs 66.96 per kg in the corresponding period of the previous year. Assam orthodox is selling at Rs 82.86 per kg, up from Rs 77.47 a kg. Even Cachar CTC is springing back to life with prices shooting up to Rs 56.07 per kg against Rs 46.55 per kg in the previous year.

Indian Tea Association chairman Bharat Bajoria believes there will be more gains from next month. “We expect the second half to ring in some good news for tea companies. The first half was a disaster. We expect that there will be some recovery in the months ahead.”

Prices in the first half slid below the cost of production. “We are yet to recover from that. Last year was also a bad one for the industry,” the ITA chairman added.

Warren Tea’s Gautam Bhalla said crop figures show the country is heading for a shortage. “September prices have brought some hope. Quality tea is fetching good prices, but we feel the next six months will be better.”

Tata Tea officials echo the sentiment, saying the going could be easier between October and March. What will also help matters is a financial package that the Reserve Bank of India has sanctioned for the industry. This has proved to be a big breather in these hard times.

Exports suffered a major setback in the CIS countries. Figures available till July show that shipments are down 16 million kgs to 30.93 million kgs from 47.03 million kg in the corresponding period of the previous year. However, there has been some success in Iraq, which has bought 21.36 million kgs, up from 5.80 million kgs.

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