New Delhi, July 06, 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. This particular variety of Darjeeling teas have historically been of very high quality and are almost entirely exported. While Darjeeling tea is a niche product catering to specific markets, the reduced availability of second flush Darjeeling tea is likely to lead to some substitution of such tea with tea from different geographies. 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% of the domestic production.
Darjeeling typically has five flushes through the year. The second flush, from late May/early June to early July, produces a very premium quality of tea and fetches high realisations in the export markets. Such tea typically contributes to around 20-25% of the total tea produced in Darjeeling, but the revenue contribution is much higher, given its premium nature.
Mr. Kaushik Das, Vice President and Sector-Head, Corporate Sector Ratings, ICRA Limited , 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 [1] increasing from Rs. 346.6/Kg in 2016 to Rs. 360.66/Kg in 2017 (YoY growth of 4%). However, leaf plucking and processing activities have been suspended since the second week of June, following political strife in the region.
Corporate Comm India(CCI Newswire)
