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India: lack of USSR poses economic threat to tea and coffee industries.

Liberalization of trade and industry and making Indian goods competitive in the global market have been the main plank of the economic policy of the new Government since it came to power in June 1991. The tea and coffee industries of India have been looking forward to the manner of applicaation of this new policy, until the Union Minister for Commerce announced at the Annual General Meeting of the Indian Tea Association on in late November that the Tea Board should be run by the tea industry. According to the Tea Act of 1983, the Board, which is a representative body of planters and other interests works under the control of the Central Government. The Minister's announcement implies withdrawal of that control. This will naturally take its own time as it calls for amendment of the Act. In the meanwhile, it may be expected that the severity of bureaucratic control over the tea industry will be reduced. Similar announcements has been made by the minister in respect of the coffee industry, at the annual general meeting of the United Planters' Association of South India in Coonoor in September.

There could not have been a more appropriate time to initiate such a major move of this nature. Global production of tea has exceeded 2,500,000 tons in 1990 and it is expected to rise further in 1991. Up to September 1991 it was higher by 31,000 tons in whcih India has a substantial contribution with her estimated production of 735,000 tons which is higher by 204,000 tons compared to 1990.

Sri Lanka and Africa producers are also expected to be substantially up. Reduced intake by traditional importing countries in the wake of higher global production, becomes a matter of concern. U.K. import is down by 13% in 1990 and further decline in 1991 is apprehended. Moreover, in the current political Situation import by Soviet Union has become unpredictable which remains a great concern for India's tea industry. A contract for 130,000 tons under bilateral agreement is in force till the end of 1991 providing a limit of 50,000 tons of CTC. It is doubtful if the total quantity will be lifted. Although the minister assured that the Soviet market is not lost, the absence of a fresh bi-lateral trade agreement with the Govt of India or valid letter of credit from any independent Republic, he will not be in a position to buy teas in the last auction of the season falling on end-December, transaction of which will move into 1992. Individual Republics which have declared independence have no buying mechanism and with tea buying being a specialized job, uncertainty about quality, quartity and timing of purchase deepens. It will certaintly take time to get settled and establish a regular supply channel with the Union or independent Republics, but it looks almost sure that a substantial part of packet tea trade will suffer.

Global imports having declined by 4% in 1991 with feeble possibility of recovery and Russian export being uncertain, India wil have to largely depend upon retaining existing market and extending to new areas to maintain her share of tea exports. Iran and Egypt may come to rescue to some extent on sharp edge of competition with Sri Lanka. Exports in 1991 (Jan/Dec) may end up at 210,000 tons which is marginally higher than 1990. Declining trend in global prices continues to be a matter of concern for the plan tea industry. Depreciated value of Rupee, however, has partly served to maintain a balance in terms of national currency income which needs 23% rise to cover devaltation. Export of value-added items such as instant tea, packet tea and tea bags, have marginally declined from 9,170 tons in 1990. Pattern of Indian tea export in 1992 will largely depend upon the shape Soviet Union takes.

Considering steady rise of internal demand at the rate of 4.5% and need for larger exports, the target production of 1,000 tons by the turn of century is being maintained. In order to achieve the target it is recognized that either more land is to be made available in the tea growing areas of yield per hectare is to be increased by using improved methods of cultivation. Possibility of making available additional land contiguous to traditional tea growing areas appears rather bleak. Organized sector of planters, however, ensure 3,000 kg per hectare compared to the present average yield rate of 1,650 kg per hectare, provided taxation rates are revised by the State Government as pointed but by ITA.

In another development cultivation of tea in non-traditional areas initiated some years ago have started showing up. Teas produced in Orissa and Arunachal Pradesh have already come to the market. The average price fetched by Donyi Poli of Arunachal Pradesh is above the general average and ranked top quality teas. Orissa Tea Plantations' garden covering 213 hectares is said to be highly profitable producing quality teas. Finding tea production in non-traditional areas profitable, more and more enterpreneurs are getting interested. Moreover, setting up of tea gardens being helpful in maintaining ecological balance and a source of employment in the backward areas - state governments are also keen and helpful.

Industry to Pursue Specialty Market

Unremunerative international prices coupled with unpredictable business with the former Soviet Union has reduced marketing manouevrability of Indian Coffee industry. Earlier production estimate for 91-92 season has now been revised to 2.10 lakh tons. Out of previous year's crop of 1.68 lakh tons, a quantity of 40,000 tons was contracted with the former Soviet Union which is being fulfilled. In case of a further bi-lateral trade arrangement, Rupee/Rouble exchange rate will play an important role.

Like tea, a substantial part of Indian coffee in bulk and instant form is exported to Soviet Union every year under a bi-lateral agreement, which will call for re-adjustment of Rupee/Rouble exchange ratio, or fresh arrangements with independent republics again. Emphasis has, therefore, been given upon creating a quality image of Indian coffee. The Coffee Board has been asked by the Minister of Commerce to prepare appropriate publicity campaign to this end. Coffee Board is reported to be working on proporals in association with export trade to establish a unique identity for Indian Coffee a the consumer level.

Efforts are also being made by the R&D division of Coffee Board to market speciality coffee. A new product has been developed comprising large sized beans of washed Arabica in the name of Mysore Nuggets extra bold. It is expected that 1000 tons of this coffee will be on sale during 91-92 season.

In the matter of industries control over the Coffee Board as indicated earlier the major question of marketing arises. At present a berry on the coffee plant is the property of the Coffee Board as it is plucked, cured and transported under bond and auction is conducted directly by Board. The numerous small growers holding 4 hectares or less are assured of at least disposing of the production. Extreme cuation is required in this sphere unlike tea where auction is controlled by the traders association.
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Title Annotation:Soviet Union
Publication:Tea & Coffee Trade Journal
Date:Apr 1, 1992
Previous Article:Forecast for coffee production.
Next Article:Javamania in Japan.

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