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India: tea promising, coffee not.

India: tea promising; coffee not

The unique union of tea and coffee under Tata banner has created a new history in take-over bids in India. Tata Tea's open offer of buying two consolidated coffee scrips for one Tata tea share plus Rs. 100/ - cash has been overly responded by the resident shareholders of conscoffee. About 31 percent resident shareholders and 50 percent financial institutions have responded positively giving Tata Tea a clean chit which has been approved by the extraordinary general meeting. Government approval now is a mere formality. Thus the largest tea producing company takes over the largest coffee producing compnay of India in a smooth and absolutely clean process.

There are many coffee producing estates who also produce some tea. Conscoffee is not an exception. Its tea production is also substantial. Conscoffee estates spread over coorg Karnataka and parts of Tamilnadu is a well-managed company. It will be interesting to observe how the tea and coffee behave under the same company. While the boom period of the tea industry in India is continuing, coffee is faring rough weather, particularly after suspension of ICO quota sustem.

In addition to taking over conscoffee, Tata Tea has scored another big point in joining hands with the West Bengal goverment in its multimillion Dollar Haldia Petrochemicals project by tossing over the largest industrialists of India, particularly Ambanis (Reliance group) and Goenkas (RPG). The Assam government is unhappy over this deal and warned tea interests in Assam that profits earned from tea in Assam should be invested in the development projects of Assam state. While Tata Tea is, no doubt, backed by the Giant Tata group, the recent activities of the company do reflect the robut health the tea producing companies are enjoying.

According to J. Thomas, 1989 production ended up at 684 M kg. which is 17 M kg. short of the previous year. Tea exports have not been able to meet the expected 223 M kgs for which licenses were issued by the Tea Board. In spite of lesser production, Indian tea enjoyed good prices due to an overall global deficit of around 200 M kg. contributed bvy Georgia (USSR), Sri Lanka and China. Another important feature of India's export trade was a substantial rise in packet tea export which is a value-added product. Compared to 32 crores of rupees earned in 1988, packed and instant tea export jumped to 78 crores of rupees in 1989.

Protocol for 190 envisages no change in tea export from India to USSR - it remains at 135 M kg. Moreover - Iraq, Iran, and Poland - Indian's tradition export markets, could not lift required quatities due to high international ruling prices. I order to fulfill export target for 1990, a strategy has been mooted by planters associations, according to which a rise in production of Orthodox variety has been called for. Such a move will make available more Orthodox variety which is required in these markets. Heavy Russian purchase at the peak of season shoots up price driving out other customers. A purchase plan for Russia has therefore been called from the Tea Board so that production plan can be made accordingly to balance demand and supply.

Although it is rather early, some estimates project a production of 720 M kg in 1990. In order to meet ever-increasing demands of the domestic marlet and the need to raise Indian tea exports, further steps to increase production is being stressed. While subsidies in rejuvenation, replantation and extension are already there, another step in this direction being felt by the producers is grant of subsidy for infilling. Substantial non-tea areas are available within tea acreage which, if planted with tea, will surely go a long way.

The Indian voffee industry, however, presents an opposite view. Export prices are often lower than the minimum release price. Receipts into the pool from 1988-89 crop was 216,000 tons - add to its, 36,000 tons of undisputed stock of previous year. In the absence of ICO quota system and price balance mechanism, it was a tremendous task for the coffee Board to find markets for 252,000 tons. The USSR came to some rescue by contracting for 50,000 tons of green coffee and 5,500 tons of instant (equivalent of 13,750 tons of green coffee). Moreover, the Coffee Board directly sold 10,000 tons to the U.K. In addition, a quantity of 75,000 tons has been earnmarked for internal release. Moreover than 60,000 tons has been released through export auctions. Finally a stock of about 42,000 remains for disposal up to March. Although the balance quantity in paper does not appear abnormal, we ask how far will the released quantity for export actually be shipped within the current financial year ending March. Due to depreciatd prices. the earning from the sold quantity is way below targeted receipt.
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Title Annotation:major tea producer takes over largest coffee producer
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1990
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