Leading credit rating firm ICRA said that tea gardens of North India will suffer from shrinkage in the margins due to rise in input costs and wage hike in West Bengal and Assam during the current fiscal.
Margins will also be affected due to low export demand and sluggish rural consumption, ICRA said adding that the outlook for the sector has been revised to negative from stable.
The credit rating firm said that all-India auction prices of the orthodox variety in the first 10 months of calendar year 2023 witnessed a significant decline of around Rs 51 per kilogram on a year-on-year basis.
The price drop in South India was lower at Rs seven per kilogram during the same period. ICRA said that the slump in orthodox tea realisation was due to lower export demand, primarily from Iran.
Similarly, the all-India cumulative auction average of CTC variety also witnessed a decline during the first 10 months of 2023 to the extent of Rs six per kilogram.
ICRA said that sluggish rural demand along with headwinds in the export markets due to oversupply of Kenyan teas have contributed to the decline.
Sujoy Saha, vice-president and sector head of ICRA, said, "A sharp decline in exports to Iran, Russia and the UAE has impacted tea prices at the auction centres in India."
Direct exports to Iran, which is primarily an orthodox market, have decreased 80 per cent during the first nine months of calendar 2023 on a year-on-year basis, he added.
According to ICRA, all-India production of bulk teas in the first 10 months of 2023 moderated by 22 million kilograms on a year-on-year basis and full-year productions is expected to ease by one per cent as compared to calendar 2022.