Scalded abroad, lukewarm at home

Reshma Krishnan

THE tea industry's flagging prospects have also been because of the mediocre export performance posted in 2000.

Exports increased marginally by 4.9 per cent to 201.1 million kg in 2000 from 191.7 million kg in 1999 -- a particularly bad year for exports. This is still a far cry from the 210.4 million kg achieved in 1998.

The value of exports declined 18.1 per cent as opposed to a 9.5 per cent growth in 1999 with a drop in realisations. A fall in demand, coupled with intense competition in the international market, depressed prices, causing a drop in the value of exports. Unit price realisation fell substantially to Rs 135 in 2000 from Rs 169 in 1999. This constitutes a fall of 20.1 per cent -- pathetic compared to competing nations whose product attracted better prices.

Kenya, for example, commanded the highest price, at Rs 211 a kg, followed by Sri Lanka (Rs 177). One would think that with prices being so low in the international market, India's competitiveness would increase. Not so. Indian tea is priced so low because its quality is not so well-perceived, and there is over supply that depresses prices.

Another reason for Indian tea not being the global flavour is that it produces considerably more CTC (crush-tear-curl) tea than orthodox. Orthodox tea caters to 60 per cent of the world market and commands higher pries.

This is where the Indian tea industry loses out. The Indian tea sector is selling tea that is not very popular in global market and, thus, any fall in volume will affect price.

Domestic shrinkage: With the exports failing, the industry is turning to the domestic market. But there are problems here too. The growth in consumption fell from 4 per cent a few years ago to 1.8 per cent in 2000.

In absolute terms, tea consumption remained the same in 1999 and 2000 -- 650 million kg (approximate figures), coupled with a slight increase in production. This is perhaps why prices fell. While an output of 650 million kg makes India the world's largest tea consumer, its consumption levels are low; the per capita consumption of 650 gm is lower than Sri Lanka's 1 kg, Pakistan's 900 gm and the UK's 7.5 kg.

Meanwhile, the general consensus is that the tea industry is losing market share to heavily-promoted aerated drinks. But this theory is suspect considering that over 60 per cent of the population is concentrated in the rural areas, where doing significant penetration of soft-drinks is still to happen. Aerated drinks might be cutting into tea's market share, but not in a big way.

The industry associations are working to tackle the situation. They have made generic branding the key strategy and allocated Rs 17-18 crore for this.