Covid-19: Lockdown leads to spike in tea prices; 79% hike in August wholesale prices

A sudden drop in production for nearly a month due to the Covid-19-induced 68-day lockdown restrictions is being attributed as the main reason for the hike in tea prices this year

Utpal Parashar, HT, 19.09.20, Guwahati  :  The lockdown had impacted the first flush, which occurs between March and April annually and accounts for the best quality of tea leaves for the rest of the year.

The lockdown had impacted the first flush, which occurs between March and April annually and accounts for the best quality of tea leaves for the rest of the year.(Representational Image)

Prices of tea, especially the CTC (crush, tear, curl) variant, which is most widely consumed, are on the rise in both wholesale and retail markets after they were stable for around five years.

Wholesale price index (WPI), which measures changes in prices of goods before they are retailed, for tea grew at an all-time high of 79% in August.

The figure for May was -1.8%. While the corresponding figure for June and July was 8.9% and 45.8%, respectively.

A sudden drop in production for nearly a month due to the coronavirus disease (Covid-19)-induced 68-day nation-wide lockdown restrictions is being attributed as the main reason for the hike in tea prices this year.

All the nearly 800 tea gardens and thousands of small tea growers across Assam had to stop plucking of leaves and production from end-March and until early May due to the lockdown, a first for the 180-year-old industry.

The lockdown had impacted the first flush, which occurs between March and April annually and accounts for the best quality of tea leaves for the rest of the year.

“Tea is a commodity. Its price rises or falls depending on its demand and supply. The lockdown is the main cause for the drop in tea production,” said Raj Barooah, director of Rujani Tea.

“Skiffing – the removal of overgrown leaves that were not plucked due to the lockdown -- and extended monsoon rainfall also contributed to low production this year. Most gardens are reporting up to 40% decrease in production, as compared to last year. This is the primary reason behind the increase in prices,” he added.

Barooah, whose family-owned Aideobari Tea Estates, has been producing tea for over 120 years, cited that their two factories at Kakodonga and Aideobari have recorded a drop in production of 38% and 27%, respectively, this year, as compared to 2019.

“The rise in prices is due to a drop in supply because of the lockdown. This had affected tea auction as well. The auction picked up since end-August,” said Priyanuz Dutta, secretary, Guwahati Tea Auction Centre (GTAC).

GTAC has sold around 49 million (m) kilograms (kg) of tea between end-April and until mid-September, as compared to 63 m kg during the same year-ago period.

“Last year, the price of CTC tea leaves was around Rs 130-Rs 140 per kg, which has increased to Rs 250-Rs 260. Prices are likely to stabilise or drop by around 15% in the next couple of weeks because production has gained momentum,” said Sikandar Bansal of Aggarwal Brothers, a Guwahati-based tea trading firm.

Tea traders and garden owners are of the view that the quality of tea produced in Assam has improved this year, most likely due to untimely skiffing, which is not usually done across all the plantations around the same time.

The situation is similar in the tea-growing Dooars region of north Bengal, which is also reporting a rise in prices due to an acute shortfall in supply because of the Covid-19-induced lockdown restrictions.

“The hike in tea price is directly related to the shortfall in supply. There was a huge shortfall in production until July because of the Covid-19 pandemic,” said SK Saria, managing director (MD) of Soongachi Tea Estate in the eastern Dooars.

“Though the production capacity was met in August, the previous shortfall is yet to be overcome. There was an increase in tea consumption during the shortfall in supply, which helped the industry fetch good prices,” he added.

Kamal Kishore Tewari, chairman, Siliguri Tea Auction Committee (STAC), said, “Production of tea in the country has reported a shortfall of 200 m kg, while the demand has increased exponentially. At STAC, which is the largest auction centre of CTC variant in north Bengal, the average prices have increased by around Rs 100 per kg as compared to that in April.”

(With inputs from Pramod Giri in Siliguri)

(Courtesy & source: https://kalimpongonlinenews.blogspot.com/2020/09/covid-19-lockdown-leads-to-spike-in-tea.html)