Russia-Ukraine war won't have much impact on Indian tea industry

Russia-Ukraine war wont have much impact on Indian tea industry
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Highlights

After having sold 1st flush tea from our estate in auction for Rs23,000 per kg, with good monsoon projections ahead, we are also bullish about 2nd flush Darjeeling tea, says Madhav Sarda, MD, Golden Tips Tea

Darjeeling-based leading tea retailer- Golden Tips recently came to limelight after it had purchased organic white tea, a special variety of the beverage, at Rs 23,000 per kilogram and 'Moonlight' tea at Rs 21,000 per kg from Goodricke's Badamtam estate in Darjeeling. The prices are the season's highest so far. Tea retailer Golden Tips plans to expand its footprint through the e-commerce route by entering into strategic partnerships in the country and widen its reach in export markets through distributor tie-ups overseas. Speaking to Bizz Buzz exclusively, Madhav Sarda, Managing Director, Golden Tips Tea, and an expert tea taster, decodes what is often known and described as 'champagne of tea'

According to Indian Tea Association (ITA), annual production in Darjeeling tea has drastically fallen from 12 million kg to six million kg, with the primary reason being difficulty in replantation due to the hilly terrain and lack of expansion of the cultivation area in the region. Has the output fallen substantially or alarmingly? What is your take on this?

See, you will have to keep in mind that tea production (both quality and quantity) needs nice and warm sunshine and at the same time good rainfall. If there is a shortfall of either of the two, both quality and quantity drops. The tea output in the period that you mentioned, had gone down thanks to a dry spell and as there was no precipitation. Rains started very late and bushes were not flushing. Although the output had fallen initially due to lower rainfall, it subsequently picked up. Now it's almost normal. However, having said this, one must remember that there is nothing like 'making up for production losses'. Whatever has been lost, has been lost.

The fall in output notwithstanding, the good news is that the first flush Darjeeling tea (green tea and white tea) fetched very good prices. In fact tea from your garden was sold for Rs23,000 per kg. Tea from some other garden or estate was sold for Rs21,000. What about the second flush? Are you hopeful about a repeat performance?

Yes first flush tea from our estate was sold in auction for Rs23,000 per kg. But the quantity was very small. I wish the quantity had been larger. With monsoon having been finally set in and with the projections and optimism over normal or good monsoon, we are bullish about the second flush Darjeeling tea also. I think the second flush Darjeeling tea will also do well in the market.

Darjeeling tea is only a miniscule percentage of the domestic and overseas tea market. Do you see this growing substantially, going forward?

Darjeeling tea is only 7 million kg market (all varieties taken together). So, good quality Darjeeling tea market is even smaller. Ironically many people are finding it easy, convenient and making more business sense in focussing on tea tourism, tea resort, than concentrating on producing good quality Darjeeling tea.

Do you think that the Sri Lankan crisis can be a blessing in disguise for the Indian tea sector, Sri Lanka being one of the largest exporters of tea in the global market?

See, tea plantations, plucking- everything have been done in Sri Lanka and they will have to be sent to the market. Especially in the current situation they are in dire need of dollar or other hard currencies. And tea is one of their top forex earners. So they will do everything possible and make sure that their tea reaches the global market and fetches foreign exchange. Therefore, even if there are some minor benefits, I don't think there will be some significant or long term gains or benefits for us. Exports will continue from that country.

How would the ongoing Russia-Ukraine war impact Indian tea industry?

The overall tea exports had also fallen. Tea exports were lower due to shortage of shipping containers and high ocean freight. Tea exports fell to 195.50 million kg in the 2021 calendar year from 209.72 million in 2020, according to Tea Board statistics. And subsequently, tea exports declined by 2.4 per cent to 184.35 million kg during the April-February period of the last fiscal, according to latest Tea Board data.

The shipment of the crop stood at 188.91 million kg in the corresponding period of the previous year. When it comes to Commonwealth of Independent States (CIS) countries, including Russia and Ukraine, in particular, they imported 41.18 million kg, the highest among the overseas destinations of Indian tea, during the period under review from 46.19 million in the year-earlier period. Among the CIS bloc, Russia was the main importer with a shipment of 31.88 million kg in April- February period of 2021-22, down from 33.65 million kg in the same period previous year.

But I think these are all temporary setbacks and it happened because both the transport route and payment routes came under shadow. Although India continues to enjoy the best of relationship with Russia, it has taken a non-committed and impartial stand in this armed conflict. India is also taking a role in mutually settling the conflicts. India is going ahead with its plans on the economic and business front. So, I think the conflicts will be resolved in due time. Unless there are further escalations, I don't think we have reasons to be too much worried about this.

The tea industry has been seeking and demanding a special financial package from the Centre for retaining the viability of plantation activity, which is now under 'threat,' according to the industry. What is your take on this?

Although the industry, in general, has been demanding this, personally I don't think that anything is going to come. On the contrary, whatever little sops and other facilities we have been getting here and there, may gradually be taken away. That's the trend. Personally, I also have a feeling that the moment we get anything we start to ask for more. We should rather strive to be self reliant and self sufficient.

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