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Disappointing tea exports during FY00 - Views on News from Equitymaster
 
 
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  • Jun 19, 2000

    Disappointing tea exports during FY00

    India’s tea exports witnessed dissenting growth due to low overseas demand and drop in domestic production as a result of drought conditions in the northern region for the first four months of the year 2000.

    Tea exports which is the country’s major foreign exchange earners declined sharply by 22% to Rs 17.7 bn during FY00. In volume terms the total exports came down by 12.6% to 183.8 m kg during the same period. The maximum dip was witnessed in the month of March 2000 leading to significant drop of 37.9% in export volumes to 10.7 m kg.

    The drought in the northern region also affected production growth adversely. Production of tea during the year declined by 7.4% to 805 m kg. India exported around 23% of the total tea produced during the year. Most of India’s exports are to Russia and the CIS nations. Even though there was an increase in the quantity imported by Russia, there was a decline of 16.7% in value terms. The fall in exports is due to differential duty structure adopted by Russia in case of bulk and packaged tea. Russia levies an import duty of 20% on packet tea and 5% on bulk tea. Since India exports mostly the packaged tea, the export revenue growth suffered adversely.

    All this affected the revenue growth of Tata Tea negatively. The company’s turnover during FY00 increased by marginal 4% to Rs 9.2 bn. The company markets more than 90% of the packaged tea.

    The conditions are changing during the current year 2001. This year the weather has been favourable and there is adequate rainfall in the tea producing belts. India’s tea production during the period January to April 2000, increased by 29% to 142.9 m kg. The company’s sales growth is likely to improve this year with the changing weather condition leading to increase in the tea production. However the realisation might be affected by the high import duty imposed by Russia on packet tea. The strength of the company lies in increasing volume growth, which in turn will drive revenue growth.

     

     

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