INTERVIEW - McLeod Russel sees tea prices up 25-30 pct in FY10

By Niladri Bhattacharya

KOLKATA (Reuters) - Indian tea prices are expected to rise 25-30 percent in 2009/10 due to severe drought in growing regions and a crop shortage from Sri Lanka and Kenya, a senior industry official told Reuters in an interview.

"We started the season with 25 million kg shortage in the pipeline and and it increased to 100 million kg due to unprecedented drought during March-April," said Aditya Khaitan, managing director, McLeod Russel India Ltd.

"Then again till middle of June, with very scattered rainfall so far, the shortage will remain and prices in the current fiscal should remain 25-30 percent higher going forward," he said.

He also said the trend is set to continue in the coming year as well as the shortage could go up to 50 million kg, adding India's total tea production could fall in Jan-Dec 2009 to 965 million kg.

"For Indian tea industry as a whole, total production this year would be lower by 20 million kg compared to 985 million kg last year," Khaitan said.

Subsequently, exports are also expected to fall by 10 million kg to 190 million kg in FY10 against 200 million kg in last fiscal, McLeod Russel chief added.

McLeod Russel is one of India's largest tea exporters and owns 58 tea gardens.

"Our total production capacity would go up to 84.4 million kg in FY10 from 75 million kg last year, and with tea prices looking to remain higher this year, our total revenue is expected to grow by 20 percent over 2.08 billion rupees reported in the last fiscal," Khaitan said.

McLeod plans to repay 500 million rupees to 1 billion rupees of debt in the current financial year, Khaitan said. McLeod's current debt burden is 3.93 billion rupees including foreign loans.

"We see a savings of 440 million rupees to 450 million rupees in 2009/10 on lower finance cost and lower notional loss on any future fluctuations in foreign exchange," Khaitan added.