Floods in eastern India and Covid-19 impact tea production; prices rise

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Tea production has taken a hit of at least 10 per cent bringing down inventory levels, due to the floods in Assam. Fall in production, coupled with impact of extreme weather on inventory, has led to tea prices rising by anywhere between Rs 100 per kg to Rs 150 per kg at farm gate and wholesale levels. From a normal inventory of 90-100 days and a peak of 140-150 days, current inventory levels with the industry stand at mere 40-50 days. 

Fresh and peak tea production takes place during March to June which has fallen due to lockdown by anywhere between 140 million kg to 170 million kg. The annual tea production in India stands at roughly 1.35 billion kg.

The Siliguri auction average price which was Rs 159 per kg garden tea in 2019, has now increased to Rs 241 per kg, while that for Assam auction average rose from Rs 175 per kg last year to Rs 278 per kg this year. Currently, West Bengal and Siliguri garden tea prices are averaging from Rs 240 per kg to Rs 350 per kg. The impact of extreme weather on the inventory lying in warehouses in Assam and West Bengal is also behind the price rise.

Industry representatives say that the recent floods in Assam have only added to the woes that began with the lockdown, announced in the country in March to curb the spread of the Covid-19 pandemic. Apparently, March to June is the period when most of the fresh tea is produced for the year. However, due to lockdown, there has been a major fall in production, which was also aggravated by unfavourable weather.

The price hike, however, has been offset by loss in production, thereby bringing down the overall revenue for the tea companies and traders. Overall, there has been a 40 per cent fall in production till June due to the lockdown. Tea production fell after plucking came to a halt due to the prolonged lockdown, which led to leaves growing beyond a desirable size. As a result, instead of plucking, plantations had to resort to skiffing (removal of large tea leaves from the top), leading to loss of crop.

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