Calcutta, Sept. 1: Tea exporters have benefited from the rupee’s fall, which has allowed them to lower their prices and gain in sales.
The industry expects to see the impact of the gain on the third and fourth quarter earnings.
Besides, the rupee fall has enabled the exporters to compete with the Kenyan crush, tear, curl (CTC) variety, prices of which are lower by over a dollar. This has led to nations favouring imports from the African country.
McLeod Russel, one of the largest producers with annual exports of about 25 million kg, and Joonktollee Tea & Industries with estates across Assam, Kerala and Karnataka, are expecting a 10 per cent jump in exports, while Goodricke Group expects 20 per cent.
“The currency depreciation is likely to make prices of Indian tea more competitive in the international market. Exporters will have been at a disadvantage had the depreciation not happened this year when Kenyan prices are down,” said Kamal Baheti, chief financial officer, McLeod Russel.
Kenya had a bumper crop in May when India lost a lot of trade enquiries to it. A softer Kenyan price would have pushed India out of the race in CTC in markets such as the UAE, the UK, Pakistan and Egypt. Another tea producing nation, Sri Lanka, has also seen its prices go up by about Rs 20 per kg.
Only those companies engaged in dollar-denominated trade will benefit from the falling rupee. In Iran, where tea settlements are largely done in the rupee, companies are suffering because of the high freight costs, according to an industry source.
“Freight costs to Iran per container have inched up. However, we still expect to export 3 million kg more. But rupee benefits will not reach companies dealing with Iran,” the source said.
“India has also not been able to make much headway in Pakistan against Kenya. Pakistan imported 24 million kg in 2012 from India and this year we expect it to come down,” he said.
Between January and July, Kenyan tea fetched 272 cents per kg in the Mombasa world auction, down 38 cents from 310 cents in the same period last year. Indian tea saw a rise in prices.
During the same period, prices hovered around Rs 157 per kg against Rs 138 per kg last year at the Calcutta auctions. In Guwahati, it touched Rs 126 per kg (Rs 125), while in Cochin it earned Rs 113 per kg against Rs 93 last year.
“In today’s market, importers are an aware lot. Yes, we do become competitive in some markets. However, if Kenya decides to drop prices, it could be a worry. Exports are not really a factor of price. It is about making tea which is acceptable, cautioned Hemant Bangur, executive vice-chairman of Joonktollee Tea & Industries Ltd.
“Gains can to an extent be nullified as in the domestic market price of diesel will rise and fertiliser prices will also skyrocket,” he added.