Political Unrest In Darjeeling Likely To Impact Tea Exports: ICRA

Business world, 4 July 2017: Darjeeling is currently witnessing a political unrest, which has led to the suspension of operations at tea estates in the region, at a time for production of the second flush tea.

Indian credit ratings agency ICRA believes that the impact of the current situation on revenue is estimated to be in the region of Rs 100 to Rs 150 crore at present. However, a prolonged political unrest might result in a significant impact.

The impact of the loss of export volumes for Darjeeling tea on the domestic supply-demand situation is expected to be limited as it has limited domestic demand. Moreover, with an annual production of 9 mkg, Darjeeling accounts for only 0.8 per cent of the domestic production.

Kaushik Das, Vice President and Sector-Head, Corporate Sector Ratings, ICRA Ltd, said “For Darjeeling teas, a plucking cycle of five to six days is followed. Timely plucking of fine leaves contributes to the overall quality of the tea produced during this period.” 

“Thus, the lack of plucking activity over the past 20 days is expected to have an impact on the production volume as well as the tea quality, even when operations re-start. This in turn is likely to impact the export performance of Darjeeling teas.”

In the current year, weather patterns have been favourable, leading to good quality and increased production in the first flush.

Initial indicators for the second flush were also positive, with average auction prices for Darjeeling tea in the first week of June increasing from Rs 346.6/Kg in 2016 to Rs 360.66/Kg in 2017 (year-on-year growth of 4 per cent).

However, leaf plucking and processing activities have been suspended since the second week of June, following political strife in the region.