India to increase tea imports as production hit

GUWAHATI, India, Sept 1, 2006 (AFP) - India, the world's largest tea producer, will boost tea imports to cover growing domestic demand despite an expected production shortfall blamed on a heat wave, officials said Friday. This year, the country is likely to increase tea imports to 25 million kilograms (55 million pounds) from last year's 16 million kilograms, industry officials said. India began importing tea in 2004 from countries like Indonesia, Sri Lanka and Vietnam as domestic demand picked up and production remained broadly flat.

The northeastern state of Assam, which accounts for 55 percent of Indias annual tea production, is reeling under a severe heat wave and the government has declared a "drought-like" situation. "Tea bush mortality is more this year and we might have to close down operations for the season a little early due to the lack of rain," said Dhiraj Kakati, secretary of the Assam chapter of the Indian Tea Association (ITA).
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The annual monsoon rains in the region are running at 33 percent below normal levels, dealing a blow to India's 1.5-billion-dollar tea industry. Last year, India produced a record 928 million kilograms (2.04 billion pounds) of tea and it was expected to produce 930 million kilograms this year. But now the country will not be able even to meet its export target of 195 million kilograms and production so far this year is 10 million kilograms short of output during the same period last year, Kakati said. Domestic consumption has risen by 25 million kilograms to 805 million kilograms this year, he added. "Domestic tea consumption is growing at a compounded annual rate of 3.3 percent while crop production has been hit by inadequate rainfall," Kakati said.

Meanwhile, tea prices which had been falling steadily at weekly auctions since 1998 have started to firm.

A kilogram of high-quality Assam tea fetched 74 rupees (1.60 dollars) in the auctions last week -- up from 62 rupees last year. Before 1998, however, the same tea sold at about 90 rupees a kilogram. The slump in prices has been attributed mainly to competition from new tea-growing countries. The Indian government announced in May a one-billion-dollar package to revive the industry, with 60 percent funds earmarked for Assam, to boost production.