The rejection of certain lots of first flush teas by buyers, both in domestic and international markets, has created a storm in a cuppa with prices of CTC (curl-tear-crush) dropping by nearly ₹30-40 a kg over the last few days. Prices of CTC have declined by nearly ₹27 a kg or by 13 per cent to ₹187.06 a kg from ₹214 a kg, over the past one month.

Industry insiders are worried that this could well be a spoiler for tea prices during the peak quality second flush season. Second flush crop is very crucial for the tea industry, both in terms of production and prices. So any impact on this affects the profitability of players.  A certain set of tea traders and buyers have recently cancelled their purchases, going by reports that indicate that the chemical content in some lots of teas are higher than the maximum residue levels (MRLs) and, hence, do not conform to the FSSAI standards.

According to J Kalyansundaram, Secretary, Calcutta Tea Traders’ Association, nearly 39,000 kg of tea in Kolkata auction have been returned by buyers as they were found not conforming to FSSAI standards. This apart, at least one container of tea to Taiwan and one to Iran have been returned by buyers on similar grounds, industry sources said.

“CTC prices have dropped by nearly ₹40 a kg on a year-on-year basis. It was ₹226.77 a kg in Sale 22 last year while this year the average price is ₹186.41 a kg,” Kalyansundaram told BusinessLine.

Demand for CTC down

However, the drop in prices has more to do with demand rather than the recent issue of MRLs, he said. While demand for orthodox has been very good in international markets, CTC demand has been slightly muted, primarily due to the lower prices of Kenyan tea.

“If there is an impact due to this MRL issue and exports get affected, then, the domestic market will also get hit and prices will come under pressure, particularly, for the mid and low-quality teas. Those adhering to quality will continue to get the premium,” Kaushik Das, Vice President and Sector Head, Corporate Sector Ratings, ICRA, said.

The entire tea industry is aware of problems relating to MRLs of pesticides and has been taking steps to bring down the quantum of pesticides per hectare of land, Prabhat Bezboruah, Chairman of Tea Research Association (TRA) said.  

However, the climatic changes have made pest attacks more rampant and if right amount of pesticides are not given at the right time, then the producer may end up losing the crop, not just for one year but, subsequently, for two-to-three years, sources said highlighting the challenges of minimising usage of pesticides.    

The MRL issue

It is to be noted that a certain section of tea trade has been complaining about non-compliance of MRLs in teas. However, Bezboruah said that samples which have failed in certain labs have passed in labs which have got international recognition in global proficiency tests.

“The non-compliance of some teas is mainly due to detection level of MRLs set for certain compounds which the FSSAI has already revised upwards and notified through a draft notification on August 20, 2020. The FSSAI has received comments from the public on the draft notification and will notify the same shortly. However, it is disturbing to note that some teas which are shown as non-compliant is mainly due to erroneous reporting of MRL values by certain labs,” he said.

Tea Board of India had recently undertaken a surveillance activity through issuance of an advisory on May 25 this year to all producers and brokers concerned for ensuring compliances in accordance with FSSAI regulations for teas being sold through auctions and at the warehouse level.

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