India’s tea industry is churning out more Orthodox tea to meet rising demand in the global market as supply has shrunk following the economic crisis in Sri Lanka, a prominent grower.
The increased demand has lifted Orthodox tea prices even as the price of the dominant CTC (crush, tear, curl) variety remained flat. Orthodox tea, much preferred for exports, currently accounts for around 10 per cent of the country’s total tea production that stood at 1,343 million kg in 2021.
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India’s huge domestic consumption is oriented towards the CTC variety, which accounts for the bulk of the output. The economic turmoil in Sri Lanka has changed the dynamics of the market as the country is a large supplier of Orthodox tea in the world market. Its weakened presence has allowed India to export more and explore new markets.“The industry is trying to produce more Orthodox tea. The total production of the variety may move up by 10-15 percent this year,” said Ajay Jalan, president of the Tea Association of India, a body representing producers.
He reckons that the economic problems in the island nation may take one or two years to get resolved and by that time India could establish its presence in the markets traditionally supplied by Sri Lanka.
“Once the consumers get used to Indian tea, it will not be easy for them to change once Sri Lanka resumes normal supply. Also, our Orthodox tea from Assam is superior in quality than the one from Sri Lanka,” he said.
Harrisons Malayalam Ltd, a leading tea producer in South India, is running its Orthodox tea units at full capacity. Orthodox tea currently comprises 50 percent of its total output.
“Unlike CTC, there is a good demand for Orthodox tea. It will not be easy for tea producers to set up new facilities for Orthodox tea in a short time as it has to meet stringent export norms and needs several certifications,” said Anil George Joseph, vice-president of the company’s tea division.
India has been receiving a lot of feelers from Sri Lanka’s traditional buyers. “Apart from Iran, which has increased its offtake from India, we have enquiries from Saudi Arabia, Iraq and Turkey,” said Anshuman Kanoria, chairman of Indian Tea Exporters Association.
For the five months from January to May 2022, Indian tea exports have risen 7 percent year-on-year to 78.64 million kg. The growth is expected to be better in the second half of the year. In 2021, by comparison, Indian tea exports fell to a low of 196.54 million kg, an over 6 percent drop from the previous year. This was after the pandemic-impacted 2020 saw exports fall by nearly 17 percent to 209.72 million kg. Kanoria expects exports to reach 225 million kg in 2022.
Export figures from the Tea Board show the UAE as a major buyer. But Kanoria points out that the bloc is mainly a transit point for supply to Iran. Exports to Russia, which is the largest buyer of Indian tea, is back to normal after the initial setback following the onset of war with Ukraine. However, a shortage of containers and other problems continue to dog supply to Russia. “The rupee payment system has not taken off and the majority of the supply is still in dollars,” Kanoria said.
As a result of the rising demand for Orthodox tea, prices for the variety in North India have moved up by 30-50 percent, lifting overall tea prices, though CTC tea prices have not shown as marked an improvement. North Indian tea prices up to July in 2022 are up by around Rs 6 from last year to Rs 199.24 per kg. On the other hand, South Indian tea prices have fallen by Rs 20 to Rs 107.96 per kg during the period.Heavy rains in the last couple of months have hit production in South India, leading to weak supply to the auction houses. According to Appu Kurian, former chairman of the Tea Trade Association of Cochin, the inflow to auctions is down by 3-6 lakh kg to 6 lakh kg a week. As in the case of the last two years, production in South India is expected to pick up in the second half of the year provided late rains don’t upset the calculations.