The downturn in South Indian tea fortunes started five years ago and in 2003 it had reached alarming proportions. The year 2003 for tea sector was quite disastrous, with auction prices reaching Rs.40.28 per Kg compared to Rs. 41.62 per Kg last year, compared to the Cost of Production of over Rs, 60 per Kg, In the context of declining prices, an intriguing factor that concern the South Indian tea industry is the widening gap between South Indian auction prices vis-a-vis North India (see Graph 1 and Annexure 1). A cursory look at the Graph 1 (and Annexure 1) shows auction prices at South India and North India, more or less moved in tandem from 1970 to 1998, albeit North Indian prices were higher; the percentage difference in prices did fluctuate but were broadly within 20 per cent, except for a few years. But, since 1988 the gap between North Indian prices and South Indian prices broadened and in 2003 North Indian prices was higher by 52 per cent. In rupee terms, the price in North India was higher by Rs, 21.04 per Kg in 2003.
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