Friday, September 1 2006 14:22 Hrs (IST) - World Time -

Guwahati: India will be importing an estimated 25 million kg of tea by the year-end to meet growing domestic demand and production shortfall due to scanty rains.

"The domestic consumption of tea is increasing at a compounded rate of 3.3 percent, while crop production has been hit due to inadequate rainfall leading to a gap in demand and supply of the beverage by about 25 million kg," Dhiraj Kakati, secretary of the Assam chapter of the Indian Tea Association (ITA), told sources.

In 2005, Indian imported 16 million kg of tea with the country's domestic consumption pegged at 805 million kg.

India produced a record high of 928 million kg of tea last year compared to 820 million kg in 2004. India is the world's largest tea producer followed by China.

In 2005, India exported 192 million kg of tea. "Adverse weather conditions have hit production with estimates showing deficit of about 10 million kg so far this year compared to 2005," the official said.

The northeastern state of Assam that accounts for about 55 percent of India's total annual tea production is reeling under a severe heat wave forcing the local government here to declare the state as witnessing a 'drought-like' situation. There has been a shortfall of monsoon rains by about 33 percent this year.

"Our export target is about 195 million kg this year although we might not be able to meet the demand due to falling supplies," Kakati said.

India had earlier estimated that tea production by the end of 2006 would touch a record high of 930 million kg.

"Bush mortality is more this year and we might be forced to close down operations for the season a little early due to scattered rains," the ITA official said.

India's $1.5 billion tea industry was facing a crisis with prices dropping in the weekly auctions since 1998 and exports plummeting as well. But, of late, prices are beginning to firm up.

A kilogram of good quality Assam tea sold at Rs.74 in the auctions last week. Last year, the average price in the auctions was Rs.62 a kg. Prior to 1998, good quality Assam tea sold at about Rs.90 a kg.

The slump in prices was largely attributed to cheap and inferior quality teas produced by many new tea-growing countries, thereby pushing premium quality Indian teas to face stiffer competition in the global market.

The Indian government recently announced a Rs.47 billion package to revive its tea industry blighted by plummeting prices and a downturn in exports. At least 60 percent of the package has been earmarked for Assam, considered the heart of India's tea industry.